Getting paid is obviously pretty important. Without money our businesses are dead in the water; poor cash flow is the silent assassin of freelancing. So, in this week’s article, I thought I’d run through some of the strategies which I either use/know about to help encourage clients to part with their cash.

1) Contracts

I have to say that I’m not a fan of those contracts written in impenetrable legalese – those just look plain scary and I’ve found them to spook reasonable clients. On the other hand, some contracts are nice plain English – I much prefer that approach. And why not have a clause in your contract which details your ‘payment schedule‘ for the project; this lays out, in no uncertain terms, when you expect to be paid, how much, what happens if you are not etc. Don’t leave these crucial details up to an unspoken gentlemen’s agreement because, if you do, at some point it will turn around and bite you on the arse. Hard.

2) Deposit

Before a project begins, it is important that the client has parted with some money. If it is a new client then this is really, really important – talking about websites is one thing; putting your hand in your pocket to kick off a paid project is another.

How much a deposit to ask for? Well, like everything in life, that depends. Some people say 50%. Personally I typically aim for around 25% as I like to smooth the money over the life of the project (my projects are around 6-20 weeks elapsed time). By all means request a larger deposit for a new client if you are worried about getting your fingers burnt.

If they don’t want to pay the deposit (and can come up with no reasonable reason why not) then you need to walk away. Shaggy dog stories of when money may turn up should really set your alarm bells ringing. The only occasion I’ve been flexible here is when I’m dealing with very large companies such as multi-nationals who may have procurements systems which are set in stone; in those instances you just need to use your best judgement.

3) Regularity of Payments

A project typically has a set of phases; discovery, planning, design, build, testing etc. I tend to make the end of each of these phases a billable checkpoint where the client agrees to sign off what has gone before; this then triggers an agreed part payment of the overall project cost.

Note:  I have to hold my hands up here; sometimes projects drag on longer than they should (not normally my fault I hasten to add!) – and on these occasions I’m reminded that I really should set firmer deadlines for when stuff should happen so that, even if something hasn’t been signed off, ‘x’ money could be released. My staff need to be paid each month; so I need to make sure that money comes in. I’d be interested in what time related clauses you ladies & gentlemen use.

4) Final Payment

I normally state that the final payment is required as and when the website is ready to go live; i.e. the project is fully paid up before we press the big, red button. This has another benefit in that the conversation is then about support post launch; instead of being caught up in an endless cycle of changes which has somehow been lumped in as part of the original project (we’ll be delving into this nest of vipers in a future article).

5) Late Payment Fees

Put these in your terms and conditions. The GOV.UK website has some excellent information on this. Basically you can charge a set fee for debt recovery and interest on the outstanding debt. The debt recovery fee is handy to compensate you for the mucking around you have to do chasing people (remember, that is time which could have been spent working on billable projects or playing with your kids).

Again, some larger orgs seems to have insanely long payment terms and they aint gonna change them for you. The important thing here is to find out what their payment terms are first, find out what is negotiable and then see if it’ll work for you (and, in these circumstances, what we cover in point 8 might be useful).

6) Cancelled Projects

If a client cancels a project part way through, you should make sure that your terms and conditions cover your ass. You might think “but it’s ok, they’ve paid for the work done to date” but you’re missing the point: you’ve budgeted your company resources (even if that’s just you) on delivering that project; perhaps you’ve even turned work away because your pipeline is now full. Why should you now be penalised because a client has created a large hole in your workflow?

Obviously it pays to always try to be reasonable and fair with clients but reasonableness & fairness only go so far. If your terms & conditions state that if a client cancels a project, the total cost of the project is due or the total cost of the current stage is due (irrespective of how much work has been done) then you have more options if things get hairy.

7) Refuses to Pay

Luckily I’ve never encountered this (although I’ve hit pretty much every other issue!) and the circumstances where I normally hear about this happening typically involve a lack of contract, terms & conditions, clear specification etc; you really want all your legal boxes ticked in case push ever comes to shove.

An easy option is to get a legal looking letter sent to offending client; that’s often a quick & cheerful way to shake things up a little. One such company who offers this service (and more) is Thomas Higgins.

Seeking firmer legal advice is your next recourse. You may end up going to the small claims court. Don’t expect this to be an easy process though and, if that debt isn’t huge, you may well be tempted to write it off as a bad experience and think hard about your process so that you don’t make the same mistakes again.

8) Factoring

Factoring is where you get paid (regularly) by a third party based on the invoices you raise; if the client doesn’t pay, then this isn’t your problem and it’s all handled by the factoring company. The factoring company take their cut; but that’s the price you pay for the added security.

I’ve not used factoring but, thinking about it, it could be an option for the larger clients who pay on on long terms (e.g. 90 days);

Here’s a link to a factoring company I’ve found online but I’ve not used them so please don’t take that as a recommendation.

Parting Shots

Please shout out if you have anything to add to the above or with any comments you’d like to make.

Joel