Having a Clear Payment Process
Episode #3 of the course How to freelance like a pro by Paul Jarvis and Kaleigh Moore
Today, let’s talk about getting paid.
Once, as a freelancer, I was shorted $30,000 by a single client, at a time when I was only making double that each year. I lost six months of my entire freelance “salary” to one client.
It was for a large company with employees and a multi-year track record—and it happened gradually. I was repeatedly promised the money as long as I “just finished this one thing.” By the time I finally put my foot down, the bill was huge.
I never wanted that to happen again. It hurt my pride and my bank account. Luckily, there are strategies you can apply to significantly reduce your number of non-paying clients.
Use a Net0 Policy
Larger companies typically have time-based invoice payment terms, like Net30 or Net90. This means the other party has 30 or 90 days to pay. Many freelancers automatically adopt this practice too, and while net payment terms might be wise for big companies, they’re not a good idea for freelancers. Here’s why.
If you’re hired for a project and spend your time finishing each deliverable, you should be paid right when the deliverable is complete and approved—not 30 or 90 days later. The whole project could be done by then. If there’s no lag in your work for the client, there should be no lag in their payment. That means Net0.
I’ve had a Net0 policy for years now, and it’s cut the number of late and non-paying clients to zero.
In order to instantly collect client payments, they need to pay you online through a reputable payment processing system. These systems skim about 3% from each transaction to process the money and transfer it into your account. That cost is worthwhile to me, though, because I like the peace of mind that comes from seeing the money in my account and knowing we can move on to the next deliverable.
No Payment = Stop Working
As a rule of thumb, if you don’t get paid, don’t keep working. This rule is non-negotiable. It should be in all your proposals, and you should be up front about what it means. As soon as a deliverable is finished and approved, you immediately send an invoice that includes a link to your payment processing system. Most clients pay me just a few minutes after receiving the invoice.
Here’s an idea of how to break down your project payments:
• down payment — 10%
• first stage (e.g., logo design) sign-off — 20%
• second stage (e.g., website template) sign-off — 30%
• 3rd stage (e.g., beta site) sign-off — 30%
• launch — 10%
Only 10% of the total fee remains at launch because by the time you’ve finished doing your part to this point, the job is basically finished.
Things to Consider Before the Start of the Project
Projects don’t start unless:
• You receive a down payment. If a client complains about paying before the work begins, they’re probably going to be a bad client. If you’re blocking time on your calendar and turning down other work in the meantime, you should receive money to hold that spot.
• You’ve both read, understood, and signed the proposal. The proposal doesn’t become a binding agreement until both parties are 100% clear about what’s expected and what the project will involve.
• The client turns in their homework. Waiting for essential data, documents, files, assets, passwords, or photography can be a huge holdup. Don’t start working until you have what you need.
Ensuring that you get prompt, timely payments can be uncomfortable. You might feel like making such specific demands will turn off your clients, but I’ve found that the opposite is true. The more I set polite, firm, and enthusiastic boundaries, the more my clients respect those boundaries.
In tomorrow’s lesson, we’ll get into how to effectively communicate within your freelance work.
See you then,
Creative, Inc.: The Ultimate Guide to Running a Successful Freelance Business by Joy Deangdeelert Cho, Meg Mateo Ilasco
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