FreshBooks studies impact of invoice terms on timing of client payments

Daniel Reiter for the FreshBooks blog writes:

We wanted to understand if there are any patterns to getting paid faster, so the FreshBooks Data Analytics team did some digging into what FreshBooks customers use as invoice payment terms in 2019, and what the impact of those terms have on client payments.

Turns out if you give your clients more time to pay, they’ll take it: Putting “30 Days” in your payment terms has lower time-to-paid percentages than the “All Invoices” column.

One of the most glaring takeaways is that asking for payment sooner will get you paid sooner.

Imagine that.

Also:

Your key takeaway to [getting] paid faster is to ask for payment within 7 days and start charging interest on unpaid invoices. Throw in a “Thank You” and you’ve got your bases (and your client relationships) covered!

Use Your Payment Terms to Get Paid Faster

Regardless of your billed revenue, as a solo consultant (or small firm) you are only as viable of a business as your liquidity.

Your business will die – even it bills out a billion dollars – if it doesn’t collect it fast enough to pay your own bills and your own salary.

I’ve been pestering anyone who will listen about this sort of thing for years (e.g. here).

Invoicing and collecting on your accounts receivable is generally not an exciting topic for most business owners. But cash flow is the blood flow of your business. When you think of it that way, perhaps it’s worth an afternoon or two of tweaking.

My suggestion for invoices:

“Due upon receipt. 1.5% per month financing charge applicable if not paid within 7 days. Don’t hesitate to let me know if any concerns or issues. Thank you!”

(Check your local laws; I’m told that many states regulate what the maximum annualized late payment interest percentage can be. Mine works out to 18%. If unsure, remember I’m not providing legal advice. A safe bet might be to see what your local utility companies have in their fine print and match it).

It was time to make a change – Becoming a Freelancer

Dan Spratling writes on DEV Community about their just two week old freelancing adventure:

I’ve been struggling to thrive in corporate environments for a while. Lots of meetings, very little team-play, or having poor leadership. Some of the workplaces I’d been in had been toxic, others just couldn’t accommodate the growth I was capable of. Whether big or small, I’d been held back working for other businesses and I’d had enough.

It was time to take back control.

I started researching, as we all do when making a life-changing decision (I hope!). I gathered as much information as I could, looking for ways to make a living as a freelancer. Many of my friends had been freelance at some point so I asked them for help, either by asking for advice or through referrals.

Becoming a Freelancer – DEV

Great tips for aspiring or existing freelancers in this post from new freelancer Dan Spratling, a UX consultant and website specialist, who I came across recently on Twitter. A lot of folks starting out are afraid to commit to avoiding hourly billing, insisting on upfront payment collection, and ongoing marketing. Dan is farther along than I was when I started out. 🙂

Prospecting: The Freelance Habit You Didn’t Know You Needed

Megan shrewdly writes on the BlackFreelance blog:

One thing I will give employment credit for…it does package up work nice and neat. That’s what keeps people hooked.

That’s what keeps people running back…work just sitting there waiting for you without you having to think about where it comes from. It’s the hardest thing to walk away from.

That little fact right there? Is why freelancers who are serious about their businesses really have to focus on making a mental shift when it comes to getting work, and that’s why today, we’re gonna talk about prospecting.

First off I want to be clear about something…anyone who wants to build a sustainable freelance business that adds actual value in their life? They’re going to have to think about prospecting. BUT…it’s something you develop over time, so if you’re bad at it, scared of it, or have no idea what it is, that’s fine and totally normal. You’ve got time to up your prospecting game.

Prospecting: The Freelance Habit You Didn’t Know You Needed – BlackFreelance –

Self-Employed? Here’s How You Can Apply for a PPP Loan Too.

Dan Biewener writes on the Fundbox blog:

If you are self-employed — as a sole proprietor or independent contractor with no employees — you may still be able to apply for a Paycheck Protection Program (PPP) loan until August 8, 2020. Don’t let the “paycheck” in the name fool you into thinking you wouldn’t qualify for this forgivable loan. In fact, since you don’t have staff headcount, payroll, and benefits to calculate, your application process (for the loan and later for forgiveness) should be much simpler.

In essence, even as a sole proprietor, the PPP loan can provide you with funds equivalent to 2.5 months of net earnings you would have made — if it weren’t for the coronavirus/COVID-19 pandemic — based on a comparative period from 2019 (or the first 2.5 months of 2020 if your business began this year).

You can also use a portion of this loan to cover some operational expenses for your business (like business-related rent, utilities, or interest payments on a mortgage or other business loans). However, if you want to qualify for loan forgiveness, these operational expenses can only account for up to 40% of your total loan amount.

Self-Employed? Here’s How You Can Apply for a PPP Loan Too. | Fundbox Blog

Going through the detailed list in the post, it actually doesn’t look terribly painful to apply for. And worst case: it’s a cheap (1%) five year or ten year term loan (if you end up not qualifying for 100% forgiveness). Well, actually worst case is that you really need it and don’t get approved, but the point remains …

I haven’t done this, so I can’t give a firsthand perspective. I suspect a few folks, however, may find this information useful. There’s no shame in applying if you need it. And if you need it you need it.

What Few Consultants Deliver That Every Client Wants

Merilee Kern interviewed David Fields for Innovation Enterprise. It’s filled with lots of nice tidbits like this:

Fields contends that most consultants—particularly boutique firms—who don’t have enough clients believe they have a visibility problem; i.e., not enough prospects know about them. In fact, most of those consultants have an impact problem. They’re in front of enough prospects, but those prospects don’t care about what the consultant is offering. In contrast, successful consultants know how to ‘fish where the fish are,’ which means they focus their firms on issues clients are aware of and urgently want to solve. Amazingly, many consultants offer solutions the consultants think are important, without ever checking the market need.

What Few Consultants Deliver That Every Client Wants | Articles | Strategy | Innovation Enterprise

You Don’t Really Partner With Your Clients

Blair Enns writes on the Win Without Pitching blog:

Many agencies like to boast on their websites and in their pitch decks that they “partner” with their clients. It’s bullshit of course. What they mean is they aspire to have their clients treat them like partners instead of vendors. I get it. It’s good to have a goal. But putting it on the website doesn’t make it true.

[…]

As an industry, we need to let go of this need to claim partnership with our clients and embrace the fact that some of these relationships are purely transactional. At the same time, however, we should keep an eye open for those wonderful but rare opportunities for true partnership. 

You Don’t Really Partner With Your Clients | Win Without Pitching

Also his observation about client mix is worth mulling over:

A Normal Distribution of Client Types

In a healthy client roster you will have a mix of client types. On the left-hand tail you will have a small number of transactional price-buyers to whom you are effectively selling excess capacity, and once-good clients on their way out.

In the middle you will find the bulk of your clients, made mostly of value buyers who, though they might be price sensitive, understand they need to invest in your services to generate value in the marketplace.

And out on the right-hand tail you might possibly have a coveted partner. Maybe even three.

Once you get the hang of this performance pay thing, you may decide to be more selective about your clients with the goal of one day having all of your clients be partners. But that’s a path few firms will choose and fewer still will be able to master. Most will choose instead to spread the risk across many engagement types with the bulk of their engagements being in the low risk, low reward category.

Putting a Final Nail in the Timekeeping Coffin

David C. Baker writes on his blog:

The only reason to track time is to create a feedback loop that allows you to do a better job estimating the next time around. And when you’re pretty good at that, you drop timekeeping altogether and step up to value pricing. By the way, this gets easier if your client relationships slowly begin to look more and more alike as your positioning creeps into your service offerings.

Putting a Final Nail in the Timekeeping Coffin — David C. Baker

Good insights here, particularly for folks straddling the (supposed) fence between hourly billing and fixed/ value-based fees. It’s not as simple as just throwing out hourly billing or time tracking. It’s more nuanced than that (particularly at first).

You Can Only Win if You Keep on Pushing

This is a powerful essay from former consultant and long-time entrepreneur Justin Couto. I think any entrepreneur can well relate to it. He writes:

No one starts a business to have it fail, but unfortunately, that is what happens all too often. I know I certainly had many close calls with business failure while running my former companies, and the weight of those seemingly inevitable failures baring down on you is crushing. It can be kryptonite to the point that your paralyzed and utterly ineffective at finding a way out.

SoCreate – Bootstrapping Ain’t Easy: You Can Only Win if You Keep on Pushing

Anyone who has ever tried to create/ build something meaningful – whether a business, a non-profit, a movement or piece of art – can relate to the things shared in this essay. Inherently a lot of tears, frustration, second-guessing, uncertainty, setbacks, and personal growth are behind just about every step – or leap – forward.