Getting Paid

It’s December 23rd 2008, James and I are staring at the Pitch bank account wondering why nobody has paid their invoices this month and stressing about how we’re going to pay all the bills. Little did we know that everyone else had gone on holiday before paying their bills!

Thankfully one of our clients actually paid on the 24th so everything was fine but it’s not a great feeling being strapped for cash and Pitch happened to be at a stage where we were young enough to be living off each months invoices. I want to help you avoid a similar scenario so below you’ll find some tips on a very important part of business or freelancing: getting paid, on time.

Get a Deposit

There’s numerous reasons why getting a deposit before starting work on a project is a good idea, but the biggest is that you’re proactively screening clients. The vast majority of clients will have absolutely no problem paying a 30% (or more) deposit up front and when a one does push back on this your first alarm bell should go off. If they’re already having problems committing money to the project what’s going to happen later on?

The other big reason to get a deposit upfront is cash-flow. Nothing in business is more important than cash-flow and having this extra cash in the bank allows you to focus on the job at hand, rather than stressing about your outstanding invoices. The last thing you want to be doing is putting off your current client work to chase up the client from last month who hasn’t paid!

Relationships Require Communication.

Make no mistake, if you’ve received the deposit for a project you’re now in a relationship with that client and for it to be a mutually beneficial one you’re going to have to communicate — lots. Here’s a list of things you should have already discussed and written down before starting a project:

  • If the original cost is a fixed price or an estimate.
  • How scope creep is handled.
  • The projects ongoing costs, if any.
  • A clear payment schedule.
  • How unforeseen costs are handled.
  • The interest rate you charge on overdue invoices.
  • What happens if you start running out of budget.
  • How change requests are handled.

If you’ve covered off all these things before starting the project you’re in for a much smoother ride, but you still need to communicate, especially if you start running out of budget. Letting a client know that you need extra budget to achieve a certain result is going to get you a much better result than just doing the work and slapping the extra cost on the invoice at the end of the project.

Friendly & Firm

You’re running a business and the client needs to understand this. Speaking from experience if you’re just the young guy they’ve got helping out they’re going to think they can walk all over you. You need to ensure that while you’re always friendly and helpful, that you’re also firm and stand your ground when you need to. This will not only earn you the respect that you deserve but you’ll find they’re also a lot more responsive when it comes to things like paying your invoices on time.

This also applies if a client has missed a payment, simply send them a polite but firm email that states the invoice is now overdue and that you require prompt payment. You’ll find this will be enough to get most clients back on track.

Last Resort Leverage

Unfortunately even if you’ve gone above and beyond the points I’ve mentioned above some clients will just be plain difficult. This is where having leverage is helpful. How you approach this is completely up to you but the general idea is to have a way of withholding the work you’ve completed for the client until you’ve been paid in full. For example at Pitch we host/manage a lot of our clients projects, which means if they’re being particularly difficult we can simply ‘turn off’ the project until we’ve been paid. Thankfully we’ve never had to do this and it’s only something we would consider as an absolute last resort but it’s comforting to know that option is there.

Wrap Up

Hopefully these tips have been helpful and have given you something to think about. It’s also worth mentioning that 95% of the time clients are perfectly reasonable and will have no problem paying on time, it’s just that you only need to be burnt once to realise it’s better to be safe than sorry.

Finally a quick thank you to Ludwig for suggesting this topic, it’s always good to get feedback and suggestions, so if you have something you’d like me to cover, leave a comment or shoot me an email.