The best way to avoid becoming your own part-time collection agent is to set up a good system that starts with your very first client meeting (whether that “meeting” be in person, over the phone, or via email). You may not eliminate every instance of payment follow-up, but you will at least cut way back on the need to go after what’s owed you. Try implementing the following system –
1. Avoid the likely problem-clients to begin with
Not only do the following client “types” hint at potential payment problems, they also signal likely time-wasting frustrations when it comes to approvals –
The freelance-shopper – This is the client who has tried several freelancers or small firms on this project – never a good sign. Not only will you likely not satisfy this client; but a few of those previous freelancers may have moved on because of problems collecting.
The hard to catch – You’ve responded to a job posting and the potential client is interested. So you send along your “stuff” – links to posted articles, samples, fee schedule, whatever you usually send or they want to see. He or she agrees to your terms, but when you want clarification on job elements in order to begin, it’s like pulling proverbial teeth to get replies to emails or phone calls. If he’s too busy to tend to the project he wants done, why should he be punctual about paying for it later? Better to back off from the project than to spend as much time collecting for it as you do working on it.
The tentative or undecided – If the client isn’t really sure what she wants, you can expect to go through several rewrites – possibly never satisfying the client. It could portend a lot of extra work beyond what you covered in your agreement – or it could signal collection problems.
The “poor-mouther” – If the client is concerned about a tight budget, you should hear alarm bells. It’s likely he or she will express even greater budget problems when payment is due.
2. Talk about money during your very first meeting with a new client
While discussing the project and what you can and will do, explain clearly your payment terms – what you charge for and how, when you require payment, and that you always use a letter of agreement to be signed by both parties – which protects both of you because you each know you are working from the same page.
3. Request payment in advance
Unless it is a very small job of less than $100, explain that you require one-third or one-half or a minimum of $xx on deposit (or as a retainer), and that you will begin work on the project as soon as you receive that deposit.
4. When to consider compromising your terms
Compromise on the amount of the deposit or any other of your stated terms IF the client provides a good reason for why it would be impossible for them to comply, and IF it fits within the “ballpark” parameters you have previously set up in your system, and IF that client appears to be promising enough to work with. Never compromise on your stated or usual fee for the complete job – but you might eliminate some parts of the project in order to lower the end fee – or extend deadlines in order to give them more time to pay.
5. Find out their payment chain of command
Who gets the invoices? How do they prefer receiving invoices (fax, mail, email)? Who must approve? Who writes the checks How long does their payment process usually take? By knowing this, you will know when best to get an invoice to whom and how.
6. Prepare your Letter of Agreement (LOA)
Once all terms have been orally (or email) agreed to, prepare your standard LOA, filling in the blanks for this particular job. Describe your understanding of what you will be expected to do, when you will have it completed, who must sign off on approvals and when they will do so, and what your fees will be for each task or segment of the project and when payment will be made. It’s a good idea to make it clear than any copyrights bring transferred to the client will not be reassigned until full payment has been made. Also, any product being launched, such as a book you’re ghostwriting, cannot be published until you are paid in full (as you own the copyright until then).
7. Wait to begin working on the project
Begin work only when you have exchanged signed copies of your Letter of Agreement, with any changes agreed to and initialed. If you requested (and the client agreed to) a deposit before work would begin, then wait until you have check or PayPal payment in hand.
8. Invoice on time and when it is to your advantage
If they pay all invoices on the 10th of the month, don’t deliver your invoice on the 11th or you will wait an extra month to get paid.
9. Follow up immediately after a payment is missed
If your terms were net 30, make your first call on day 31. If it was simply an oversight, you likely will receive your payment within the week. If there is a problem, you need to discuss it and work out a plan with them, plus get in line ahead of the others they are likely not paying either.
What tactics or steps have you found to work well to help ensure payment? Please share below.