A 2015 study from Freelancer’s Union noted that 71% of freelancers have trouble getting paid at some point in their career. Worse yet, among those freelancers, 81% were paid late and 34% were completely ghosted. And we’re not talking pennies, here. The average amount of unpaid income reported in 2014 was $5,968. That’s a significant blow to just about any freelancer’s budget.
When clients don’t pay, freelancers spend valuable time chasing down payments, often have trouble meeting their own financial obligations and may even have to take legal action. If ghosting happens to you, there are certain measures you can take before turning to your attorney. The first step to getting paid on time, every time, is to protect yourself before even starting the work.
Having a contract helps prevent nonpayment issues by creating a paper trail documenting what the client should expect to receive and what they’ll be charged for it. This helps cut down on customer complaints about the work not being what they wanted or the price being higher than they agreed on.
Documenting your agreement with a written contract may not prevent all payment issues, but it does cut down on the number of dishonest clients who just want to get work for free. It also gives you better recourse options when things do go wrong. If you’re not sure where to start drafting a freelance contract, check out this recent post on creating simple and effective client contracts.
Along with a signed contract, get a deposit payment—especially first-time clients. Wrapped up in the excitement of getting new work, you may be hesitant to ask for a deposit in fear of “rocking the boat” or irritating your new client, but it’s important to make it known that if you’re not paid, you don’t work.
Once you’re working on a project, invoice frequently. The shorter the time frame between you doing the work and getting paid, the better. How often you invoice will depend on the type of work you do and the type of clients you have. For smaller jobs, you might send an invoice as soon as the work is done. For larger contract clients, billing once a month might work better. Just remember that the sooner you invoice, the fresher your stellar work will be in the client’s mind and the sooner you’ll have money in your bank account.
Clearly specify the due date on your invoices and have a system in place for following up on all invoices as soon as they are due. Sometimes a friendly email or phone call is all it takes to get the payment ball rolling. Keep in mind that the older your invoices get, the less likely you are to collect, so follow up quickly on late payments to cut down uncollectible accounts.
Next, make it easy for clients to pay you. Some freelancers and small business owners decline to accept credit cards to avoid paying high credit card transaction fees. But if clients are slow to pay because you’re making it more difficult for them, the lost time and expense of trying to chase down your money can quickly exceed the cost of accepting credit card payments.
Some clients prefer direct deposits into your checking account, some pay via PayPal or credit card, and some will only mail paper checks. Whatever method they use, if it means getting paid, make sure you’re on board.
Need cash now? Fundbox will purchase your outstanding invoices, giving you cash as early as the next day. Instead of waiting 30, 60 or 90 days to get paid, you get your money immediately, then pay Fundbox back as your client continues to pay you directly as usual. Note that this service doesn’t take the collection duties out of your hands. It works more like a payday loan, giving you a cash advance on the amount you’re owed in exchange for a reasonable and highly transparent fee.
Making sure you get paid may seem like a second job on top of the work you’re already doing, but putting it off is a costly mistake. Take steps to protect yourself early on, follow up on late payments promptly, and bring in the big guns when needed. If you want your business to succeed, getting paid for your hard work is absolutely essential.
We get it: Juggling clients, projects and payments is an art. But don’t feel like you need to keep all this information on a spreadsheet or in your noggin. There’s a solution out there for you. FreshBooks can help minimize the chances of you getting ghosted by a client.
All you need to do are two simple things: Enable Late Payment Reminders in your FreshBooks invoices and allow your clients to pay you online. If a client doesn’t pay on time, with Late Payment Reminders, you can lean on FreshBooks to notify your client. (No more awkward money conversations!) And by enabling online payments, you make snail mail a thing of the fast. Your clients can pay you with a click of a button, right on your invoice.
Need to get a little more tenacious with a non-paying client? Freelance Collection takes over correspondence to advocate on your behalf, escalate the situation when necessary and negotiate settlements when possible.
Freelance Collection only makes money when you do, so hiring them to handle collections is risk-free.
Do you have a client who isn’t a deadbeat, but is just a slow payer? You don’t want to cut ties, but you’re also sick of sending emails that get ignored. Just Tell Julie. Julie Elster has built a career around handling the dirty work of collection calls for you.
For a flat fee of $99 upfront and a 35% commission after she collects, Julie will make a polite call to your client and collect on your invoice over the phone with a credit card.
Sometimes, even with a signed contract and a deposit, you’ll encounter those clients who just don’t pay or take months to pay you. Using online tools and resources are valuable immediate solutions, but what do you do beyond that?
Your contract should include a clause explaining what will happen if the client doesn’t pay on time. Will you charge a late fee or interest? Will you send them to a collection agency or take them to small claims court? You can also specify in the contract that if the account goes to collection, the client has to pay the attorney or collection fees. Having those measures documented in writing prevents disagreements down the road and can protect you from an expensive and time-consuming hassle later on.
Sometimes, sending a simple demand letter is enough to get a deadbeat client’s attention. The Freelancers Union offers a free sample collection letter to remind clients of the terms of the contract and what steps will be taken if payment isn’t made promptly.
If that doesn’t work, you can also consider taking the client to Small Claims Court. Each state has their own limits for what is eligible for Small Claims Court. In Kentucky and Rhode Island have the lowest thresholds, with an upper limit on the disputed amount at $2,500 or less. Tennessee has the highest dollar limit at $25,000. Check your state’s website for any special rules or exclusions.
Before you file in small claims court, gather all of the evidence to support your claim. That will include the signed contract, any email exchanges documenting terms offered and accepted, proof that your work was delivered and other correspondence. Depending on your jurisdiction, you’ll have to fill out a statement of claim in person, by mail or online and pay a small court fee. The clerk will then give you a date for the hearing and send notice of your claim to the defendant.
If following up on invoices and handling collections is not the way you want to spend your time, for a small fee you can outsource the process to someone else. Accounts receivable experts and freelance collection agents often work with freelancers to collect receivables professionally and politely. They can do your “dirty work” so you don’t have to spend time making uncomfortable collection calls and potentially damaging the relationship with your client.