The perils of working for yourself: getting paid
I mentioned in my last post that I’ve only been working for myself for a few months. So far it’s gone quite smoothly, although there have been a couple of issues with getting paid on time.
Personally I find it awkward asking people for money, even though I’ve done some work for them. If they pay me as the terms of my invoice ask (within 30 days) then there isn’t a problem. But having to phone and e-mail asking for a late payment is something which makes me uncomfortable. There’s no doubt you have to do it, and if it takes a lot of chasing you’re not getting paid for that time either.
I asked some fellow freelancers how often they experience this problem and I discovered it’s fairly common. Even big household name companies can be slow to pay up. One person I spoke to had invoices outstanding from the beginning of the year. As a writer, my only expense is time. But if you sell a product then you’ve had to buy in stock or materials beforehand. The cost of an unpaid invoice must mount up at times.
So how do you handle a company which isn’t paying you? My friend, Claire Lancaster, a freelancer and owner of Dandelion Lounge, had some great advice. She suggests asking for a contact in the accounts department who you can speak to about unpaid invoices so your relationship with the person you work for isn’t jeopardised. If the invoice hasn’t been paid after 30 days then she calls weekly after that to chase it. And if a payment is late she suggests asking them how invoice processing can be simpler in the future. This gives them the message that you expect to be paid on time.
Another good piece of advice I came across was to add up the time spent chasing the invoices and weigh that up against the amount you’re being paid to decide whether it’s worth your while. This was something I did and I decided the time and hassle wasn’t worth it.
So if anyone reading this has struggled with being paid or has some advice on how to deal with companies who pay late, I’d love to hear about it. I’m sure lots of other self-employed people would too.
These are all good tips – another though is to be asked to be paid in advance. I often do this now – for instance agree you estimate that it will take 10 hours at what ever rate you charge then ask for 75% before you start and the rest on completion (at which point you can add expenses etc. Frankly i vary the percentage I ask for up front on the size and reputation of the company. I’d also only give 7 working days and make it clear you will charge interest if they are late. All of this may sound tough but if you position right up front that this is your normal practice then by implication most of your clients are already doing this – and most people will do it without too much argument.
Reality is that as a freelancer you do not want to subsidize the cash-flow of a bigger company – let alone spend time chasing in debt.
Promise this does work!
That’s a good idea, something I might try myself!
I have found that getting a machine to take cc has helped with credit control. When I phone to chase up invoices I tell them I can take a card payment if it’s convenient, and quite often I can get payment there and then. Obviously there are costs (to me) of a cc payment, but at least I have payment. With bigger companies, I find for me it’s been impossible to impose credit conditions such as 7 days or upfront payment, as often they have standard systems which they won’t deviate from. So even though I have a 7 day clause on the invoice, it’s not adhered to, and if I phone at that point, I will get a response such as ‘our payment run is the 31st of the month’ etc. With smaller companies I do charge a third on commision, a third at an agreed milestone, and a third on completion – but I often have to wait thrity days for each of these payments!
Thanks for sharing this Emily. I’ve just had a client cease trading on me, so can back up the advice to get payment up front for some of the work.
I’d also advise that you stay on top of invoicing: it is much easier to chase payment on a regular basis and keep reminding people that you are there and waiting to be paid than to bring it up after a gap of several months.
Antonia
Yes I can see your point about it being hard to impose conditions on companies, some will pay all their invoices on a set day of each month. Being able to take a credit card is a great idea. Maybe Paypal is another option? Although there’s a charge associated with that too.
I think some payment up front is a lesson I’m learning too and will do it in the future, I’ve done some one-off work for someone the payment’s late and I wish I’d asked for something from them first. Thanks for the tip about invoicing, I guess contacting them regularly is more likely to get a result.
I offer a discount to regular customers who pay by paypal subscription or direct debit – it saves me (and the bookKeeper) SO much time and effort checking and chasing that it is well worth it.