Freelancers: Mastering Timely Payments in Your Business
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Chapter 1: The Challenge of Payment for Freelancers
Recent reports indicate that many freelancers struggle to receive timely payments from clients. Rafael Espinal, the president of Freelancers Union, noted, "One of the biggest challenges freelancers face is getting paid on time, if not getting paid at all." Alarmingly, the report titled "Getting Paid in the Independent Economy" revealed that 59% of freelancers are owed $50,000 or more for their work, with 72% having unpaid invoices. This raises the question: how can one maintain a viable business without timely payments?
Reflecting on my own past, I recall facing outstanding invoices ranging from $40,000 to $85,000 at times. The interest accrued from credit cards and lines of credit to compensate for others' failures to pay was daunting. I even had a client issue a bad check, prompting me to visit their store the next day to demand immediate payment to cover my employees' salaries. Fortunately, I've since learned valuable strategies for avoiding and addressing payment issues, while also identifying dependable clients.
Section 1.1: Establish Clear Payment Terms
As a business owner, it's essential to define your payment terms clearly: whether it's payment in advance, half upfront with the remainder due in 30 days, or payment upon project approval. Start by behaving like a business and prepare written terms that you can reference during discussions and on all official documents.
Subsection 1.1.1: Effective Payment Phrasing
I've honed my payment phrasing over the years, which has proven effective. I extend credit to clients with the understanding they will pay on time. I issue monthly invoices with payments due within 15 days. I permit one late payment; thereafter, all work must be paid for in advance.
Section 1.2: Be Open to Negotiation
Understand that clients also have their own payment preferences, and negotiation is part of the process. Accept this reality and learn to advocate for your interests, ensuring that agreements reached are fair for both parties.
Chapter 2: Ensuring Payment Through Communication
This video titled "The Mistake Freelancers Make With Hourly Rates" discusses common pitfalls in freelancing, particularly regarding pricing strategies that can lead to payment issues. Understanding your worth is crucial for securing timely payments.
Section 2.1: Document Everything
To avoid confusion and increase the likelihood of receiving payment, it's vital to document all agreements in writing. While a formal contract is ideal, if discussions happen verbally, request written confirmation from the client. If they don’t provide it, send an email summarizing your understanding and seek their approval before commencing work.
Section 2.2: Don't Hesitate to Ask for Payment
In her book, We Should All Be Millionaires, Rachel Rodgers highlights that many small businesses fail to even ask for payment. Sometimes clients simply forget, and a polite nudge is all that's needed. If an invoice's due date is approaching, I remind clients 2–3 days in advance, emphasizing the various payment methods I accept.
In the video "How to Figure Out Your Hourly Rates as a Freelancer," viewers can find a step-by-step guide on establishing a fair hourly rate, which is fundamental to ensuring you are compensated appropriately for your work.
Section 2.3: Follow Up Relentlessly
If the initial request for payment is via email, follow up with a phone call. Be persistent, and ensure you secure a commitment regarding when the payment will be made. If payments aren't received when promised, don't hesitate to reach out again.
Chapter 3: Payment Flexibility and Security
Accepting multiple payment methods—like PayPal, Venmo, and credit cards—can facilitate smoother transactions. Consider keeping a client's credit card on file for timely billing, but be aware of the legal and security implications involved.
Section 3.1: Firm Commitment on Payments
If a client cannot pay on time, seek partial payment and a written commitment regarding when the remainder will be settled. Treat this date with the same importance as the original deadline.
Section 3.2: Communicate with Honesty
Maintain a list of assertive yet truthful phrases you can use during difficult conversations about payments. Express your needs clearly, whether that’s highlighting your responsibilities or the urgency of your situation.
Section 3.3: Legal Recourse
If repeated requests yield no results, consider escalating the situation. A letter from a lawyer or a call from a collection agency may be necessary, but keep in mind that this can affect future working relationships.
Chapter 4: Building a Trustworthy Client Base
To minimize payment issues, carefully select your clients. Prioritize working with established companies and those who come recommended. Building positive relationships will lead to a sustainable business model.
Section 4.1: Your Own Trustworthiness
Finally, being trustworthy yourself will attract clients who share that quality. As noted in The Tao of Negotiation, the most important rule in business is to deal with honest people.
Sharon Woodhouse is the owner of Conspire Creative, which provides strategic collaboration services for authors. Subscribe to her email list for insights on maintaining a profitable author business.