Independents: Avoid getting burned on client pay. Here’s how.

Working as a contractor is hard enough. Don't let trouble getting paid keep you broke.

The estimated reading time for this post is 11 minutes

If you’re a small business owner like me, you’ve probably experienced the frustration of chasing payments from clients. Getting burned on promised fees is a huge problem for us.

In fact, according to the Freelancer’s Union, every year, the average amount clients owe independent agents is about $6,000 in unpaid and late invoices. As many as 77% have trouble collecting payment, too. That means client debt issues loom larger for contractors than almost any other.

If you’re like me, you want your business to help you become wealthy, not keep you poor. Having stringent pay policies and honoring your own worth leads to healthy, wealthy living.

Moreover, when this a full-time endeavor where it’s imperative to derive income to live on, it’s unacceptable. That’s certainly true of me as a contract writer and communications consultant. Cash flow is enough of an issue for business owners without being burned on payment for no fault of our own.

Nonpayment seriously costs contractors

The cost can be quite high for consultants and small business owners who don’t get paid. Default puts our financial stability at stake. That usually means our housing, auto, utility, insurance, childcare or child support payments can be late, and ability to feed ourselves and our dependents are impaired.

We must pay all these obligations on time to prevent dire consequences like homelessness, hunger, and nakedness. Also, legal effects of an unintentional violation of a child support order could make life unpleasant, too.

As small business owners, we also must pay costs of doing business so we can stay in business. And, how about we just want to make a life, not just a living?

Do clients understand or care what happens when they don’t pay us?

When we’re not paid on time or at all, we all wonder this. We wonder if clients who work for the businesses or publications we’re freelancing for, who demand that their paycheck is delivered on time each pay period, understand that we have the same obligations as they do?

What about other small business owners who hire us then don’t pay us but demand their invoices be paid on time and clear the bank every month? Don’t they have to meet their own business or personal obligations?

Do they know or care #FreelanceIsntFree and withholding our payments is inflicting harm on us? What about freelancing makes it so easy for some clients to do this to other human beings and their dependents? The truth is that there are some who don’t think they should have to pay us. But, neither these questions nor their answers matter when they don’t get the bills paid.

It seems help is on the way, though with aggressive measures are being taken to help contractors address this serious problem (and many others) going forward. That includes a major campaign by the Freelancer’s Union (which is responsible for the stats in the first paragraph).

Even President Obama declared to them that #FreelanceIsntFree. Lots of jurisdictions are taking action or considering it to make sure customers clients pay freelancers and small business owners in a timely way for our work.

How do business owners avoid nonpayment?

How do we get paid now and regularly until all these efforts gain traction and change the industry? Here are several ways.

Know who your client really is

You should vet every opportunity through the networks where you should be a member. If you’re a writer, ask your writer colleagues if this prospective client is reputable, pays well and pays on time. Writers also have professional organizations or services, like the American Society of Journalists and Authors or Freelance Success to turn to for information.

There are listservs and multiple groups on Facebook and LinkedIn for writers. Often, writers post on Twitter about nonpayment, though that can be dangerous. But, Who Pays Writers and Contently’s Rates Database are good sources of information on both payments and what it’s like working for publications or clients. For self-employed consultants in other industries, rely on your professional organizations, social media groups, listservs or even search engines to find out, if possible, who you’re working for.

If you learn this prospective client is a known or consistent deadbeat, don’t work for them, unless you want to fight to get paid. Besides, saying “no” to bad clients, this policy usually leads to the good ones.

Make sure the client can afford to and will pay you

Avoid startups that aren’t known to be well-funded and companies that you know are struggling, even if friends and family own them. For those that you’re not familiar with, see if you can find other contractors who’ve worked with them and ask what their experience was like, especially around payment.

Walk away those you learn balk at paying contractors what you know you’re worth, especially if they’re insulting in the process. No matter what you hear from other sources (unless it’s clear that they will be a problem payer), do you own due diligence.

Follow your gut. That “sixth sense” or “gut instinct” about prospective clients is one of the most critical business tools you have. Try not to let fear of not getting business or even financial desperation override your common sense or gut instinct. That only will lead to negative consequences.

Get it in writing

This should go without saying, but you’d be surprised how many contractors don’t get the details of project or assignments in writing. Even if you have a generic or standard contract with a client, 3 Important Ways to Protect Yourself from a Small Business Lawsuit and tells you what pay you’ll get for every piece or project.

Know what you’ll get paid for what scope of work, when and by what method. Make sure both parties sign the contract if it’s a formal contract (and that’s advisable). If it’s a series of emails, make sure all the right questions have been answers. For a writer that means you’ve asked and gotten answered in writing:

  • How much will I be paid for this piece/per piece?
  • When will I be paid, on acceptance or publication?
  • What does “acceptance” mean? When does publication typically happen? (Lock this timeframe down precisely and don’t forget to ask about the revision process because that factors into this timeframe.)
  • What method of payment do you use?
  • Do I invoice or is there another way you’ll know to pay me? (Some clients use their system and just pay as agreed.)
  • Is there a specific way to submit invoices or a particular format for invoices?
  • Do I need to submit other paperwork for on-time payment, like a w-9, statement of work or contract addendum?
  • Who is your accounts payable contact if that isn’t you?

Make sure you submit all required documents on time, exactly as requested

Submit contracts and their addenda, w-9s, and invoices on time. Adhere to the standards for invoicing precisely. (Some clients expect you to use their invoice or invoice format. Make sure you do.)

Send them to whomever they’re supposed to go (if not the client contact or editor directly) and make sure your primary contact knows you submitted your deliverables, contract or invoice (especially if they have to approve them, or they sign checks or contracts).

Make sure they confirm receipt of your documents or invoices. Keep a paper and digital trail. (I blind copy all outgoing emails to a backup email address not on the same server as my primary address. That helps me prove I sent the emails, what day and what time.)

If the client changes the process after you’ve submitted your invoice and other deliverables, insist that they pay your invoice on time based on the date you initially sent it to them. Don’t extend payment dates because clients change the requirements for invoice and deliverable submissions.

Don’t extend too much credit to new clients

That’s right. When clients are not paying you in advance for work, you are extending credit to them. You are trusting them to be creditworthy and pay your invoices on time and in full when due. In 2016, errant clients owed the average independent almost $7,000. Those clients got extended credit.

So, unless you are sure of the client’s reputation for paying quickly or on time, don’t do too much work for them until they show that they are reliable with payment.

For writers, that means not accepting late retainers and beginning or continuing work without being paid. If you contract for four articles, for example, and clients tell you they’ll pay you for those by a certain date, make sure your clients pay you before accepting more work.

Otherwise, you may end up in the hole for hundreds or thousands of dollars with a client who knows they don’t have to pay you on time or at all, and you’ll still do work for them.

Don’t give customers justification not to pay you on time or at all

Sometimes, it’s a contractor’s fault when a client doesn’t pay. Think of the times you had people do work for you on your house or car, and they didn’t do it right or when they said they would. What if they did it poorly or not at all? How did that make you feel about paying them?

You need to make sure nonpayment is not your fault. Not only should you submit documents and invoices on time and confirm their receipt, don’t breach the contract in any way, especially negligently.

Case in point? When I owned a digital agency, I had several subcontractors do this, costing me business and, the last two times, damaging my professional reputation at a critical time in the transition of the firm. In both cases, the financial losses were substantial, and I ended up closing the business and launching one where I’m not dependent on subcontractors. Don’t be that contractor.

Provide excellent client service. Nobody is perfect and life happens. I’ve been hacked several times, and that slowed work down to crawl, making submissions late. But, when it’s in your control entirely, make sure your work is beyond your client’s expectations, flawless, on time and budget.

Get all instructions up front and make sure you understand what you’re being told to do by getting that in writing. Be professional, easy to work with and easy to contact. Communicate when there are problems.

Avoid giving your client a reason to be angry enough not to pay you on time or at all or by putting them in a position where you cost them the money they would have used to pay you.

Be known as a contractor that expects clients to pay and will pursue payment

Present yourself as a serious, respectable business owner, not a disorganized, flighty freelancer who is easy to take advantage of by clients. (The shady or lax ones can tell.) That starts with doing the previous four things in this article. It continues by your contacting the client within days of the first late payment.

Refuse to do any additional work for a customer that has not paid you, routinely pays late and you have to chase for invoices. Also, be clear that you don’t mind calling legitimate deadbeats out by adding their names to nonpaying client databases, letting colleagues know to avoid them or using a (reputable) collection agency, ASJA or the Freelancer’s Union to help you get paid.

Again, just make sure you haven’t done something that they’ll argue is the reason that you didn’t get paid and public knowledge of your behavior would damage your reputation.

How much hourly is collecting your invoices costing you right now?

Remember, you’re in business to generate a profit, too, just like the publications and companies with which you do contract work. All that time you spend chasing money costs time cuts into the hourly you rate you can make working for clients who will respect you and pay you on time, every time.

Use the steps above to identify and work for those. Taking these measures won’t always guarantee that you’ll get paid on time or every time. In fact, nothing here is meant to ensure that so don’t expect that by reading this article, you will never have problems.

Moreover, how well these strategies will work depends on the independent, how they employ them, the clients involved, the industry or any number of other factors. In some cases, you may even need lawyer or accountant help to make sure you have reliable contracts that help get you paid on time. So, get that professional help when necessary.

Even when you do everything right, sometimes the best clients find themselves in financial trouble and can’t pay when expected. (Think last economic meltdown.) But, frankly, that’s not a frequent occurrence for well-established or well-capitalized clients with strong reputations for integrity, transparency, and reliability.

With the demand for top quality writers at an all-time high, you should be able to find plenty like these. The more practice you get identifying the potential problem clients (and get professional help when necessary), the more easily they’ll be to spot and avoid and the better, more reliable clients you’ll have. So, do whatever you can to protect your revenue and avoid being burned by late- or non-paying clients.

This post is written for informational purposes only. Please carefully review this site’s Content Disclaimer about how you should apply information here.

(c) 2015-2018. Dahna M. Chandler for Get Money Moxie, Inc. All rights reserved. This article may not be reproduced in whole or in part without express written permission of the author.

Post Image Credit: Pixabay.com

I’m an award-winning finance journalist with marketing expertise and business acumen. I offer engagement-generating, personal finance and small business development content writing services to thriving—high growth or established—blogs and media outlets. My passion is to help your consumer readers make their dollars make sense and operate their business with growing wealth as their focus.

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