You work hard, market yourself, and deliver on time. Then comes the moment when you would like to get paid. This seems reasonable and a tad obvious, but it doesn’t always happen. Payments are excruciatingly late or never arrive at all. And it can be heartbreaking. There are steps we can take as business owners to reduce the chances of getting stiffed when a project wraps up. It is important, for example, to set healthy boundaries that protect both the client and ourselves.
This post is part one of a two-part series focused on getting paid for the work you do, and ultimately building healthy client relationships. Today’s post provides tips for laying the correct groundwork. Friday’s post will troubleshoot problems you may already have encountered with past-due clients. So unless you enjoy burning the midnight oil for free, keep reading.
Have a written agreement.
Duh, right? Yet I am amazed at the number of self-employed professionals who skip this step. Get a written client agreement, terms of service summary, work order estimate, or any other document that outlines expectations of the working relationship and payment terms. Think this can’t be a marketing document? Think again. Aside from being able to plaster your logo and contact information on these documents, they make you look more professional and less fly-by-night. These documents also communicate on your behalf at least some information regarding what it’s like to work with you. This allows you to listen to the client, rather than talk, as he shares what he is looking for.
Intimidated by the potential cost to do this? Consider the cost you incur by not getting paid or running into trouble when ambiguity works against you. An up-front cost you have control over could save you money in the long run.
Require a down payment.
50% of the estimated project or purchase price is a common starting place. People are more likely to finish paying for something they already have a stake in. Down payments encourage commitment from a client. It’s a lot like dating. We don’t grow up hoping to get into a relationship where we do all the work and reap none of the reward. So why do it in business? If the client can’t commit with a down payment, it’s better to know this up front rather than a month and countless billable hours later.
Down payments can benefit clients as much as they benefit you. Since the balance isn’t due all at once, it can aid a customer’s cash flow, making it easier for her to pay you. Yes, you could still get stiffed on a later payment, but the initial investment will help you recover some of your costs. Down payments only work if you enforce them. Never start a project before receiving the required initial deposit.
It is easy to get caught up in your work, making it hard to set time aside to actually invoice for it. But billing regularly is critical to getting paid. The longer time lapses the more likely you’ll wait for payment or not get paid at all. Billing every two weeks or every 30 days are common increments.
Send invoices immediately after finishing a project or fulfilling an order.
In addition to billing incrementally, as noted above, make sure you bill once the order is complete. This is especially helpful if you completed your obligations but the next batch of invoices isn’t set to go out for a few weeks or more. Bill the client while the order, and all the work you put into it, are fresh in his mind.
Require same-day payments.
Assess whether your business model would allow you to get paid the same day services are rendered or products are delivered. This doesn’t work in all cases, but it can work more often than we realize. For example, do you provide in-person consulting services or deliver finished products directly to the client? If yes, then structure your terms to same-day payments for some or all of your offerings. If you adopt this method, let your customers know in advance so they are prepared when you meet. The less clients have to fuss over paying you the easier it is for you to get some green.
Getting paid can be a stressful component of self-employment. But it can also be an excellent way to connect with prospects and clients. Communicating up front about how your business operates helps them know what to expect, reducing stress for clients who work with you. When you can agree on something as direct and important as payment terms, you can then focus on what the client is concerned about, like the project at hand.
What have you done along the way to ensure you get paid on time?