Getting Paid on Time as a Freelancer
This month we’ve teamed up with Hnry to bring you fresh content every week covering a range of hot freelancing FAQs . During this series we covered topics like how to price your freelancing services , chatted with freelance illustrator Isobel Joy Te Aho-White on her freelancing journey, and held a free webinar with Hnry’s CEO, James Fuller, on ‘how to thrive as a freelancer’.
This article is proudly brought to you by Hnry
If there’s one thing that makes us all cringe, it’s sticking our metaphorical hand out and asking for money. Especially if we’ve got to ask for it more than once.
While sending out invoices and chasing them up can feel a bit like navigating a minefield at the best of times, living that self employed life means it’s up to you to make sure you get paid (and on time!) for your hard work so that your business can live to see another day.
So how do you chase up that overdue invoice without affronting your client or damaging your working relationship?
We’ll start by going right back to the beginning, well before you’ve done any work or sent that first invoice out.
Set clear expectations with a contract.
There’s a few key steps you can take before you bring a client onboard that will not only set you up for getting paid on time but also ensure your client journey is positive and professional.
Starting with having a contract or service agreement in place. Your documents should outline the details around payments, terms and conditions, and how disputes might be handled if they do arise.This usually includes:
- Expected deliverables and dates
- When and how you expect to be paid
- Payment due dates
- Consequences of late payment
- How you will accept payment
- Whether a deposit is required
- Debt Collection Policy
It’s easy to simply place ‘get a contract sorted’ into the too hard basket but having an agreement in place before you begin work not only reduces the chances of any unsettled disputes or unpaid invoices but also sets the tone of your working relationship, letting your clients know you take your business seriously and they should too.
If you don’t have a contract in place yet, have a read through the different types of contracts here and which one you’ll need for your business.
Set your payment plan
It’s a good idea to discuss a payment plan with your client before you deliver any services. This includes discussing their budget, any financial restraints, and the deliverables/payment they can expect.
Some large organisations have set dates (usually the 20th of the following month) when they pay their invoices out which is helpful to know ahead of time so you’re not wondering whether your invoice got lost in the corporate sauce (and so you can charge extra for the inconvenience to your cashflow).
Getting clear about what payment plan will work best for both parties helps build an expectation foundation and gives you the information you need to navigate a positive relationship while ensuring payments are still being made on time.
Create strong systems
Having good systems in place – such as an invoicing system – helps reduce mistakes (like forgetting to follow up on your late invoices), saves you time, and saves you money within your business all while ensuring your clients have a positive and repeatable experience with you. It also means one less thing that you have to think about.
Having a tool like Hnry – which streamlines your financial admin and allows you to outsource your entire invoicing process – takes the stress and mess out of getting paid so you can stay focused on what you do best i.e. creating top-end designs for your clients.
If you’re not familiar with Hnry, consider them your freelance design business’s bestie, in that they offer a range of financial and tax services tailored for the self employed community, including:
- automatically calculating and paying your taxes every time you get paid without you ever having to lift a finger
- streamlined invoicing software that automatically chases up overdue invoices for you
- unlimited support from expert accountants
- pay-as-you-go pricing, so you only pay for their service when your clients pay you.
Maintain good communication
It goes without saying that maintaining good communication throughout a project is key to not only a great customer experience but also to getting paid on time.
If you find yourself needing to follow up on an overdue invoice, friendly and consistent reminders are the way to go as sometimes clients simply forget and need a nudge. Here’s one response example of how to follow up the first time on an overdue invoice:
Hope you had a lovely week/weekend. I’m sending a quick email to follow up on this invoice as the payment due date was ______ and I wanted to make sure it didn’t accidentally slip through the cracks.
Imposing Late Fees
If you choose to have late fees, these should be outlined beforehand in your contract so that your clients are aware that they exist ahead of time and how they will incur.
An example of late feels might look something like this:
- 1 week = $25 fee
- 2 weeks = $50 fee
- 3 weeks = $75 fee
- 1 month = $200 fee and Letter of Demand
It’s worth noting that late fees can generally go two ways. The first is that they may increase the likelihood of getting paid on time (yay). The second is that if you have to resort to penalising a client with late fees it can lower the chance of that client honouring the payment at all.
So, if you’re worried about how late fees might be perceived, another approach you can try is marking up your services and offering an early payment discount.
If you’ve tried everything and still haven’t been paid
Sometimes you can take all the precautions and still run into this issue.
In this case, you might be wondering whether to get a debt collector or the small claims tribunal involved and the answer is, it depends.
How much is owed is probably the biggest factor in helping you decide, as the costs associated with pursuing these routes may not be worth it.
However, if you do choose to make a small claim, the contracts you have in place, emails or letters you’ve sent, payment plans and invoices will be valuable evidence in helping you win your case.