These are the techniques I’ve found most effective to get paid fast when doing technology freelancing.
1. Ask for a portion of the fee upfront.
This one seems obvious to me now, but I went several years before I moved beyond the “work a bunch of hours then send an invoice and wait” model. You can do this whether you are fixed fee or hourly, basing the latter on an estimate.
2. Ask for the entire fee upfront.
You’d be surprised how acceptable this becomes once you simply start making it your convention. And, really, it’s not all that strange when you consider that you can’t drive away with a car (or even walk out of Walmart) before paying for your purchase, as well as the fact that in most cases you are taking on greater risk than the client is by working on a project for a client for a few weeks or months with only the “hope” that you’ll get paid at the end. You are a freelancer, not your client’s banker/lender.
3. Set expectations upfront.
If the buyer can make the full investment decision upfront, rather than hope or guess, it’s easier to get paid faster. A lot of delayed payments are really because the buyer is disappointed with either the fee, the value, or the result. If your fees are fixed and thus entirely set upfront, this is easy. If you charge hourly/daily/weekly, estimate conservatively and… see the next item.
4. Offer compelling value.
I prefer to not only discuss the project upfront, but to then come back to the client with a written summary (which ends up being the proposal). The summary is in my own words but drawn entirely from our discussions. It contains, at a minimum, with a nod to the value-based fee model taught by Alan Weiss:
- The situation appraisal
- The business objectives (outputs/improved conditions) tied to the work
- The believed value of the work (business-wise and sometimes personally and professionally for the buyer)
- The implicit or explicit metrics or indicators of success for the work against the objectives
In this way, the buyer and I don’t proceed until there is a true “meeting of the minds” over the value of the work. It’s easy to get into a discussion about the inputs (tasks), but the real value is in the results. The better understanding I have of the ideal result that the client has in mind, the closer I can tie my work to compelling value. And the happier the client will be to pay, period.
5. Constantly communicate.
You know when you should be providing updates. Generally it is whenever you’ve promised to, just before or after major milestones, when there are hiccups that may impact scheduling or results, or any other time you know you should but are avoiding doing so only because you are concerned about the reaction. 🙂
6. Meet commitments.
If you make a promise, meet it. Simple, but not always easy. If something isn’t going as planned, just communicate that and adjust. Unless you make a pattern of it – or don’t learn from your mistakes – it’ll be probably okay.
7. Use plain language. (Avoid legalese.)
Don’t create proposals that require legal departments / attorneys to get involved. And if you can’t avoid it entirely, keep them sane. Business is risk.
8. Make it easy to pay you.
Accept checks, eChecks (ACH), and all major credit and debit cards as well as, if possible, via multiple processors. I accept payment via PayPal, Google Checkout, and Stripe. There is overlap between these, but every buyer/client has their own favorite service. I don’t care which they use, just as long as they pay as promptly or – preferably – as rapidly as possible.
If you are concerned about paying 2% to 3% on credit card transactions, you are overlooking that you are in a high margin business. Paying 3% on credit card transactions will make you cringe sometimes, but don’t overlook the big picture. You are providing a service with an 80%-90% profit margin. And, having money in your hand – rather than “in the mail” – is the difference between an actual sale and just talk. It’s also the difference between putting food on the table and starving waiting for money to arrive in the indefinite future.
9. Follow-up when a payment is late. Do so immediately and in a professional, consistent, and assertive manner.
I suggest clear language that doesn’t whine (it’s not their problem you can’t pay your mortgage, but it is their problem they are failing to fulfill their commitment). I prefer automated follow-up so that it always happens, otherwise I will put it off. Most on-line invoicing solutions can be set-up to do this automatically for you after a configured number of days.
10. Always make payment arrangements and discuss payment problems with your buyer (the decision maker / business sponsor), not the client’s bookkeeper or accounts payable department.
The buyer can escalate, assert their authority, and negotiate when there are problems. They are also the one who is impacted if a missed payment results in a project delay. The A/P department on the other hand isn’t any of these things.
11. Generate professional invoices that are easy-to-read.
They should clearly describe the work, account for every hour (if you are billing for time), and reference the project, proposal, and buyer clearly. Make them very simple, without any extra language or legalese.
12. Send invoices in a timely manner and do so consistently.
Immediately upon gaining agreement on a proposal. Consistently at milestones or the agreed upon dates. If possible, generate and schedule delivery ahead of time. If a series of invoices is likely, you can even provide them all upfront with rolling due dates, if that seems like it’ll be helpful.
13. State a late fee on every invoice generated that applies if it is not the balance is paid in a timely manner.
Pretty self-explanatory. A flat fee or charging interest are fine, but if the latter make sure you understand usurp your state/country specific restrictions on charging interest.
14. State all invoices as being “Due upon receipt.”
If you learn an organization is taking advantage of this phrasing to not pay within 7-10 business days, change their next invoice to be “Net 15” (due in 15 days). If they can’t pay on time, tell them to use a credit card.
15. Offer a small discount for pre-payment in full upfront.
I always ask for a portion of the fee upfront for every project, while offering a small discount for pre-payment in full upfront (in the 5% to 10% range). For projects I consider to be relatively small (e.g. <$5,000) I don’t offer a discount, but outright require full payment upfront.
Photo credit: http://www.flickr.com/photos/damianspain/9345483102/
- I am not a lawyer.