Okay, maybe not quite that definitive, but close. Suffice to say, a sticky situation the likes of which I rarely find myself in. After all, one of the best things about commercial freelancing is that payment issues are rare. 30 days or less has absolutely always been the norm for me in 95% of cases.
Was contacted a few months back by a commercial writing client I’d done work for in the past. Successful businessman starting a new venture and needing a marketing brochure for it. He’s a hands-on guy (translation: major micro-manager), but not obnoxious about it. And willing to pay for someone’s attention.
In addition to the brochure (just a four-pager), I ended up crafting a name and tag line for the venture as well. Settled for $1000 for the both, which though a lot lower than I should have gotten (good blog topic in that …), they took me, probably, a total of a 2-3 hours to do – I actually came up with the name during a meeting – so I won’t gripe too much.
Anyway, because I’d done plenty of work with this client in the past and never had a problem getting paid, I didn’t get an upfront deposit. I’d say, “Mistake!” but given the track record, it really wasn’t. And hindsight’s always 20/20. That said, it may not be a bad move, given the climate we’re in, to go with upfront deposits from all clients until things get less dicey.
Well, my guy calls me after I’d sent an invoice for the total (we’d discussed it before I’d billed him) with some disturbing news: His credit line with the bank (to cover operational expenses of getting this new venture up and running) had been revoked. It’s one of the more common by-products of the economic slide we’re in the midst of. Banks just aren’t willing to get any more extended.
Add to that that revenues from his main business are off. So, suddenly, he can’t pay my invoice – at least not right away. So, we set up a schedule, with roughly 30% due on X date, about 40% due two weeks later, and the final 30% due about three weeks after that. Deadline One (a Monday) comes and goes. No check. But, that Friday, he calls me. And that’s key. As long as people are communicating with me, I’ll cut them a world of slack. Shows good faith, accountability, and integrity.
We’re going to have to rework the timetable, he says. I tell him I’m happy to work on a schedule of $500 here and $500 there. He says great, that he’ll be get back to me. It’s been about seven days (and a holiday in there) and I haven’t heard from him, and if I don’t in a few more days, I’ll be in touch. Bottom line, while I’m not terribly pleased, I’m not worried either. I know he’s good for it.
Ever had a situation like this or similar? What did you do?
What are some of the valuable lessons you’ve learned from your experiences?
Do you get upfront deposits from all clients?
I’ve only been stiffed twice, and that was early in my FLCW career. Since then, I’ve been firm about having both a signed agreement and a 50% deposit before beginning any work. When a new client is in a rush and pushes me to get started without one or both of those requirements, it raises huge red flags for me, and makes me even more stubborn with my terms. Lately, though, payment has been slow from long-term clients, and without excuse, since these are smaller firms without labrynthine accounts payable systems. If there’s one thing that pushes my buttons, it’s slow payment. So a few months ago, I began offering an incentive that is more popular than I’d anticipated: 100% payment in advance, and you get 10% off. That’s working quite well.
Amazing timing– For over three years I’ve had a contract to produce a monthly newsletter for a client. I invoice when I’ve got their approval on my copy, and I’ve always been paid within two weeks, like clockwork. The Friday before Christmas they called to tell me they’re sorry but they have to cut back on freelancers and my gig with them will terminate in February…I’m sad, my contract was for almost $2000/month and I’ll miss the income, but we seemed to be ending on excellent terms and given the gloomy times, this was not entirely unexpected. But then another week went by and I noticed that the invoice I submitted in early Dec hadn’t been paid, so I contacted them about it… the bottom line, delivered to me an hour ago, is they “had to delay paying some invoices for a few weeks” and they’ll send out a check in early January.
Meanwhile a deadline for the January newsletter is looming but I am hesitant to submit, worrying whether I’ll get paid. I hate to leave bad feelings behind–if the company recovers, or if any of my contacts there move on to other positions at other companies, I’d hope that based on our successful work together in the past they’d call me when appropriate projects come up. So I’m still pondering whether to hold up my work until the check for last month’s work arrives or submit the copy and keep my fingers crossed. The work is basically done, so at this moment I’m leaning toward turning it in and hoping to get paid within a reasonable timeframe, but I keep going back and forth. Any thoughts?
Losing this gig means more time to devote to expanding my pool of clients, and perhaps trying some different types of writing (newsletters are pretty easy but often not the most interesting way to spend my day), so there is a silver lining here. But like Peter, I’m thinking about what I need to do differently in future, especially since I hope to be forming relationships with more new clients over the next few months. I like Eileen’s idea and may try that one, and I’m eager to find out what other people are doing to protect themselves.
I used to have some wording in my client agreements (in addition to half upfront) that the material I wrote/designed for them could not be used until full payment was made. Eventually, I took that out because it simply wasn’t realistic for some clients. But for some folks here that might be a consideration, but only if you’re willing to enforce it if need-be. (And if that’s the case, I’d recommend you running it by a lawyer so what you wrote is actually enforceable.)
I’ve only been stiffed once early on, and it was for peanuts, so I didn’t push it too hard. These days, my frustration comes more with clients who want their projects completed “yesterday”, but seem to be in no hurry to pay for it when you’re done.
I’m a bit “all over the place” when it comes to getting money upfront. In most cases, 50% is required to start. In rare cases with a new client I’ll actually require the full price upfront. And in other cases, I’ll collect the whole fee at the end.
I have yet to run into a client who simply couldn’t pay at the end of a project. (However, delays in payment could have actually been an inability to pay.) But I do agree with PB that continual communication from the client goes a long way in smoothing over delays.
It is nice that if the situation with any client gets too bad, we can simply choose not to work with them again in the future. You don’t always get that option in the corporate world.
Peter, kudos on being so zen about the situation! I had three client payment issues in the last quarter of 2008, and I am PO’ed. But I guess it’s heartening to know I’m in good company.
In one instance, a client issued me a check (after they stopped responding to my emails, I sent them a registered letter asking them to pay up) and I didn’t find out until several weeks later that the check had BOUNCED. I called and left a voice message, which they never returned, so I sent another registered letter reminding them that passing a bad check is against the law and that I expect payment (plus reimbursement for the two letters) within 30 days. So far, no response.
Several months ago, the client told me that the check was in the mail, so I haven’t heard anything about possible bankruptcy filings or financial hardships, but I assume that is the issue. Would be nice to get an email or a phone call letting me know that they are experiencing cash flow issues and hope to pay by X date.
A note to other freelancers facing payment issues: I hear a lot of flip comments about “if they don’t pay up I’ll just take them to small claims court” (not from you, Peter, it sounds like you’ve got things under control). I read up on small claims court in preparation for a possible filing, and my understanding is that you cannot serve papers to someone who does business outside your state unless you plan to travel to their state for the hearing. So, if you’re going to do business with someone out of state (and I assume that’s most of us), try to include a clause in your contract defining your county is the county of jurisdiction in case you need to file in small claims court. I’d love to hear from someone who can prove me wrong, but it sounds like I’m out of luck.
Good stuff, everyone…
Jill, I’d go ahead and work on the final newsletter. Possibly counter-intuitive, but sounds like they’ve been good to you for a long time (and clients that good aren’t so common…), so be good to them. Yes, I know – it was a partnership with mutual benefit – no one was doing anyone else a favor by hiring them or working for them, but still, I’d finish strong. I’m sure they’re good for it (famous last words…), just stay on top of them.
And as Mike points out, there’s no hard and fast rules about payment terms. In fifteen years, getting upfronts from mostly only new clients, and letting regulars slide till the end, I’ve never once been stiffed. So, maybe my “zen” attitude, as Susan calls it, comes from a decade-and-a-half of always having it work out in the end.
And Susan, yes, I’m afraid that your situation sounds pretty gloomy. I wouldn’t count on seeing anything from them. That said, I’ve heard some folks talk about having had good luck with a collection agency. Usually, they work on a percentage, so it shouldn’t cost you much, if anything, upfront. And these folks know how to put the fear of God into deadbeats. And if you’ve already written it off in your mind, if they take 30-40% (not sure what their cut is, but I have to guess it’d be in that ballpark), then ANYthing you get back would feel like “found money.” Might be worth a shot.
Was this a commercial client? Sounds like what a magazine would do (i.e., show scant respect for their contributors, and nary a qualm about throwing them under the bus…)
PB
Peter;
In my 14 years, I think this has happened maybe one time.
What I have found is that because I now accept all major credit cards and PayPal, this has helped with my clients.
I know you accept these cards as well. You might suggest a credit card payment. He gets his mile points and you let him work out the payments with the credit card company…
Mike
Because I’m not a full time freelancer, this has not been a problem for me as yet. However my day job is as an account rep with a small factoring house. This means that half of my work is spent on communications with our clients’ customers who are behind on their payment schedules. I have some experience in collections. The following “rules” work well for me.
First: Always assume your client is working in good faith, that his delayed payments are the results of circumstances rather than bad planning or a desire to stiff you. Make him prove that he’s a welsher.
Second: Listen to him and his circumstances. If he feels that you value him as a person first and a client second, you’ll get put to the top of the list of his payment schedule.
Third: Maintain a communications schedule. If your payment was due on the 15th, wait until about the 22nd or 23rd and call him with something like “John, the payment you were mailing on the 15th hasn’t arrived yet. I’m wondering if something went astray in the mail. Or was there some other hitch in the plans?”
We factor for about a hundred companies in the middle of the US from Texas to the Dakotas, Missouri to New Mexico. And I’ve been at this for more than ten years. These techniques have worked well for us. We have very few skips and the occasional bankruptcy. But considering that we deal with more than a quarter of a million individual accounts, our percentages are miniscule.
Hope this helps.
Grace and peace,
Judith
Thanks Mike, That’s actually a great idea that, mysteriously, hadn’t occurred to me… 😉 I’ll offer it up as an option to him. And Eileen, great idea on the 10% discount. I wouldn’t have thought that’d be so effective, but sounds like it’s working for you!
And Judith, I like your approach, which appears to be backed by a lot of real-world accounts. I’m also more likely to give people the benefit of the doubt. Of course, if we were in the online writing world or magazine writing, I wouldn’t be so charitable, but in the commercial arena, as a rule, clients are of far higher caliber. You’re a vendor like any other vendor, and as such, you get paid on time in 95% of the cases. In those other arenas, writers don’t get nearly the same level of respect, in large part because they agree to work for peanuts and allow themselves to get abused on payment. Not the case in our world. Mike said it when he pointed out how rare events like this actually are, and thank goodness that’s the case.
PB
Thank you for the advice and for giving me an opportunity to vent, which is what I really needed. I will submit the work and hope for the best, because they have been great clients for a long time and perhaps will be again someday. Anyway, the work is done, so there’s no advantage to holding it back–if they do go bankrupt I’ll just get in line with their other creditors.
Thanks, Peter, for providing us this great forum to learn and commiserate. Happy new year everyone!
Jill
I took people to Small Claims twice in DC. There, they make you mediate first. We waited all day for our turn to go into the little room and dicker. The deal was, the guy paid the (lower) agreed-upon rate by a certain date or owed the whole amt. I “won” both times–and was paid–by midnight of the date in both cases. They cut it close. I would have had to get someone to collect if they had not paid. Small Claims sucks pretty much unless you are owed the whole limit. I remember sitting there all day–and finally, the guy I was suing asked me did I want to buy his business. So there was comic relief.
I’ve never been stiffed in nearly 7 years, but it has gotten ugly.
When I was starting out, a local, but renowned, medical facility asked me to write a brochure to be placed in doctors’ offices all over town. My first big break!
I met with the woman twice and submitted ideas. Then nothing. After a month of silence, I sent an invoice. Still nothing. Several invoices and e-mails later with no response, I started asking around and heard, “Yeah, those people are known for stiffing freelancers all the time.”
So I wrote a very nice letter to the director with another invoice, letting him know the “word on the street,” and that I was inclined to believe it since it seemed to be happening to me, and what a shame it would be for his facility to lose access to the valuable resource of local freelance talent.
I had my check in a few days and the “invisible woman” finally surfaced with a phone call to tell me she’d been called on the carpet and almost got fired. Do you think I cared?
Sure, I burned a bridge, but there’s no point in maintaining a relationship with someone who doesn’t pay you. And it’s never come back to haunt me, reputation-wise.
I have a few clients who pay within 14 days, but 30+ seems to be the norm around here (even though my invoices clearly state NET 15), and up-front deposits never happen. I’m afraid to push it because there seem to be newbies on every corner willing to work for peanuts.
To echo a sentiment discussed earlier, I’m struck by how rare these things actually happen. It’s great to see how different folks deal with it when it does, or use policies to prevent it from happening in the first place, but again, this is one of the best things about this job: in the overwhelming percentage of cases, you deal with well-paying and reliably-paying clients. I know if we poked our head into a chat room for magazine writers or online content writers, you’d hear infinitely more bitching and moaning about chasing down their money. We’re lucky.
Happy New Year, everyone!
PB
Hi everyone,
A great deal of my writing is online – web content and such – and jobs I bid on Guru and Elance. I also have local clients. Although my prices are a bit lower due to bidding for clients on Guru and Elance, there is protection against non-payment and half is always required up front for new clients there.
Repeat clients I have from those situations are excellent at paying and usually pay within 48 hours of receipt of my invoice. Even better is the fact that they pay at a better rate after the first couple of projects – more in line with my normal rates. And I certainly could not take them to small claims court as they are located all around the world!
However, my local clients are becoming cash-strapped very quickly and begging for payment schedules these days. I am having to take payment $100 at a time from some of them. But the good news is that they are paying.
And we are all so lucky to have work. I, like all of you, get to pick and choose what I work on and when I work and how much I charge . . . and I love that! Thank you, Peter, for helping me to achieve that through your books, teleseminars, and encouraging e-mails!
Happy and Blessed New Year to Everyone!
Sally Rushmore (RushmoreWrites)
I am going through this right now with a client. Almost the same thing as Peter, I had a client I had done some work for and thought they were good for the money so I didn’t ask for a deposit. Long story short, I was promised the money in November, then it became December and now we are rolling into January. I was much more firm this month, which caused them to ask for a delay in the rest of the project until May. I told them I would give the delay, but they had to bring the account current and soon. I am only giving them about another 20 days of rope and if I still don’t get anything or some communication from them things are going to get more serious and I will begin my collection proceeding. I believe in being flexible as long as they are communicating with me, but when they make me chase them for the cash that is when my good nature comes to an end.
Always a possibility, in any economy. Good time to remember the relationship side of this business, as long a reasonably possible. Hopefully, they will bounce back and remember your good treatment of them.
Excellent comments, Judith.
A great and prosperous New Year to all!
Thanks guys,
Karen, good for you for hanging the prospect of public shaming over the head of your client. As long as someone imagines that their bad behavior is a private matter between the stiffer and the stiffee, they may likely do nothing. But it’s amazing how quickly someone will do a 180 when they realize that the public might get wind of it. May not reflect their real desires, but hey, whatever gets them to pony up.
And yes, Michael, when they make you chase them, that’s when I lose patience as well. And you’re right, Robin, about the importance of preserving the relationship – assuming THEY are acting in good faith.
An update on my situation: After Mike Stelzner suggested the credit card angle, I offered that up to my client by email. I got a call yesterday from him. Unfortunately, that won’t work as he admitted his credit cards are maxed out. He said he’d pay me $500 by around the third week of January or call me if he couldn’t. Because I’m in this with my graphic designer (who worked with the client as an employee for many years, and a freelancer more more), I feel confident that I will eventually get paid, as the client doesn’t care to lose major face and credibility with a long-time vendor/employee.
The designer said he’s a man who pays his bills, and that’s key, because it shows a depth of character, which is your best ultimate assurance of payment: he has his own internal sense of right and wrong, and he’ll do the right thing. I’m not happy that it’ll likely take a while, but I’m confident it’ll happen. On the bright side, when it finally comes, even in dribs and drabs, it’ll seem like “found money.” 😉
PB
I can’t remember where I read this advice, but I’ve been using it ever since, and haven’t had any problems.
Step 1. Submit proposal. Do nothing until proposal is signed.
Step 2. Within proposal, offer two payment options:
1) 50% due now (before starting work for new clients) and 50% due in 30 days or upon project completion, whichever happens first.
2) 100% invoiced now, net 30 days.
This way no matter what, I get paid in full within 30 days. It’s worked out great.
Another idea I had to make things more affordable, and to help clients budget cash flow, was to help them plan out their projects for the year/quarter, accept a credit card, and simply average out a monthly fee for everything. Kind of like a retainer, except it’s very much project-based, and some months have more projects than others. This way they know exactly what they’re paying. I haven’t tested this out yet because I hate giving up that 3% credit card fee; but coaches do it, so why can’t we? This way we’re not waiting for the check, and we can just take out the money every month. Obviously, this works better for small firms and independent professionals, who aren’t so attached to checks.
Thanks Kelly (and folks, if you only knew how far this woman’s come in a few short years…I’m proud of you!)
Actually, unless you read it someplace else also, you heard the above in none other than The Well-Fed E-PUB (March 2008):
III. MAIN COURSE: GET PAID FASTER & WITH LESS ANXIETY!
ONTARIO FLCW Changes Invoicing Verbiage, Speeds Up Receivables!
Got this great idea from London, Ontario-based FLCW Pete Savage (pete@petesavage.com; http://www.petesavage.com) for speeding up your accounts receivables – and adding a measure of certainty to the process (always welcome when it comes to money, no?). Following Pete’s idea are a few notes of my own about when to be flexible, and suggestions for using this same technique in other ways. Check it out.
****************************************
Hi Peter: Back in January 2007, I instituted a required 50% deposit on all project work. It worked quite well, but I felt that it came across as a little heavy, like the client might feel like they were given no choice. So I made an adjustment. At the end of the agreement, just above the line that indicates where the client is to sign off, I have two check boxes, with accompanying copy that reads: “For your convenience, two methods of invoicing are available. Please choose your preferred option:
Option A: Invoice us in two installments. 50% of the total project fee is invoiced now. The remaining balance will be invoiced upon project completion or 30 days from project start date (whichever comes first) and is payable net 15 days. Work for this project begins upon my receipt of this initial deposit check.
Option B: Invoice us once. 100% of the Total Project Fees amount is invoiced now, payable in 30 days.
The result? It works like a charm, and has sped up my receivables cycle tremendously. With two invoicing options, the client feels they have a choice in the matter, but both options are great for our cash flow! A true win-win. To my surprise, some clients choose Option B. It’s great to get permission to send an invoice for work you haven’t even started! And I get checks from “Option-B” clients for the whole amount for projects that aren’t even complete! Anyone who’s done work for large firms knows that some can take forever to process invoices. Use this technique to get your invoice into their payables stream an extra 15 to 30 days early, depending on how you’re currently invoicing.
PB NOTE: Two comments on the above:
1) GREAT stuff! AND, an FYI about the final line of Option A above: “Work for this project begins upon my receipt of this initial deposit check.” In my experience, large companies aren’t generally set up to cut checks fast, so be flexible on this point. If the company is big and reputable (i.e., you KNOW you’ll get paid), you can likely get started safely without check in hand. For smaller, lesser-known firms, get your upfront deposit (AND typically, their accounting systems can more feasibly generate a check quickly – and often on the spot!)
2) The “choice of two positives” concept isn’t a new one (see p. 24 of TWFW: Back For Seconds). Professional salespeople have employed it forever because it works. Other places it could work for us: meetings and project launches. Instead of asking, “So, would you like to get together to meet to show you my work?” how about, “Would Tuesday or Thursday be better for you to have me swing by and share my portfolio?” Or in place of “So, are you ready to get going on this project?” try “Which piece of the campaign is more important – the press releases, or the brochure?”
By contrast, yes/no questions put a client on the spot and invite no’s. The strategy may not always work, and you may not feel entirely comfortable using it verbally (in writing, as Pete shares, is easy), but the quicker you can move the prospect along with a series of small decisions, the sooner you can get to the yes that really matters.
A related issue to this is the value of a good network of fellow freelancers. I’ve been on both the receiving and giving end of cautions about clients.
As freelancers we’re always told how good or bad word-of-mouth can affect our business. But it works the other way, too… clients can be affected by word-of-mouth among freelancers. Sometimes it might be related to payment while other times it might just be about how the client behaves during a project.
I once had a client I had to let go because the company pretty much needed a full-timer, not a freelancer who had other clients. But in letting them go, I did pass along some names of other freelancers that might be a better fit. I then contacted those freelancers and let them know the situation from my side so they could make a better judgment of whether or not to take the job if the client called them.
With so many potential clients, it might be unlikely you’re traveling in the same circles as your fellow freelancers. But if you’re into a niche market, it tends to be a small world where everyone seems to know everyone else. So being able to share information can be a big positive.
HA! Don’t you just love getting your newsletter quoted right back to you a year later? Of course I would have read this enormously helpful advice in your newsletter… And of course it would have come from the enormously generous-with-advice Pete Savage. Don’t know how I could have forgotten!
Mike’s comment about freelancer word-of-mouth is so true. There’s this myth of competition some people seem to have, that doesn’t really feel true in real life. We’re either potential referral partners, potential collaborators, or potential helping-each-other-out-of-sticky-situation-advice givers.
The best measure of success is that your work is given back to you as the epitome of good work.
Back in the day when we raised hogs, my farmer-husband was looking for a good boar. So he asked the auctioneer at the sale barn for a recommendation. And got two. When he told his dad where the best boars were, his dad just laughed. Turns out they were the places that bought our weaning pigs. We would have been buying our own back. It was quite a compliment. But, of course, we couldn’t use our own boars — inbreeding, you know.
This is a neat circle of information, assistance, encouragement and inspiration. Thank you all.
Judith
The upfront money is so important… keeps me from being in total resentment if there’s a payment glitch down the road. Some of my writing buddies also charge a late fee, which I’ve considered. And yes, I recognize that “he’s good for it.” Some are. Some aren’t and knowing the difference is also important.
Had a small print job and the printer told me I could wait until he delivered… but I paid him right then. I may need a break someday, but I didn’t that day. It works many ways doesn’t it.
Anne Wayman, now blogging at http://www.aboutfreelancewriting.com
Yes, Kelly, it IS nice to have my ezine content quoted back to me.. 😉 And you’re absolutely right about writers rarely being flat-out, gritted-teeth, set-jawed competitors. I mean, when it comes down to it, essentially we are, but the relationship is far more complex than that. And I’m glad of that.
And Judith, I so enjoy the back-and-forth we’ve created here, and how, each post spawns a mini-knowledge base of sorts on that topic.
As I think I’ve said, I’ve never been stiffed in 15 years, so I guess my instincts are pretty good, so yes, Anne, I’m sure my client is good for it. I like your story of paying before you had to – it’s things like that that people don’t forget, and it’s always always always a good move to store up goodwill.
PB
I’ve really enjoyed all the comments and ideas people have offered up!
Never starting without a signed contract and deposit is SO key. It’s a lesson I’ve learned the hard way so many times over – and even just last week broke my rule and nearly got started without a contract. NATURALLY, the client pulled the plug on the project literally 10 minutes after I gave my subcontracter the green light. When will I learn!!
In general, though, I ask for either 25% or 30% at the contract signing, and the other payments are parceled out in 3rds, 4ths, or even fifths if it’s a large project.
This helps both myself and the client. For them the benefit is obvious. For me, I am very carrot-and-stick, so I find it motivating to finish whatever section I’m at so I can invoice for it. If I got paid 100% upfront – god, I would find it very difficult to stay motivated, I think!
Plus parsing out the pay helps my income come in more regularly, more like a salary than a lump freelancer check.
I’m still a newb to this world. But in your case I would have thought ‘small claims’ or ‘mechanics lean’ would have to be put in place.