Overcoming Payment Obstacles as a Freelancer
Despite what some people may think, being a freelancer isn’t easy. Besides finding clients, working on projects, and making sure that you are compensated for the services rendered, most freelancers have a full plate. You can, however, make your life much easier if you follow these steps in overcoming any unforeseen payment obstacles.
Prevent Any Problems in the First Place
If you want to overcome some of the most common payment obstacles, the first place to start is by preventing them in the first place by having the following items in place.
- Research your clients. If you’re working for a client for the first time, don’t hesitate to do some research and find out any information that you can regarding the client. If the client looks fishy or you have a bad feeling, don’t move forward with the client.
- Have everything in writing. This doesn’t have to be a formal contract, although this is preferred, having any sort of written agreement between you and the client will not only define the project and payment terms, but will also protect you if the client doesn’t pay you for your services.
- Ask for a deposit. It’s not uncommon for freelancers to ask for a certain amount upfront, such as 50% upfront and 50% when project is completed. This decreases the risk of you getting completely stiffed on a project and beings in cash while working for the client.
- Get paid for deliverables. Once you have submitted the final draft to the client, make sure that you get paid. Waiting for the client to pay you after they review an article or website design could take days or weeks. And, you can’t afford to wait that long to get paid.
- Define the scope of the project. Miscommunication regarding a project could result in a delay in your payment, having a client refuse to pay you for your services, or even having the client demand a refund. Before starting on a project, you and the client need to clearly describe the scope of the project.
- Kill fee. Sometimes you and the client have to part ways before the completion of a project. Including a kill fee in your contract will ensure that you will get paid if either party pulls the plug on the project.
- Late fees and discounts. Including late fees on your invoice, usually around an additional 2%, can motivate the client to pay your invoice on time. Besides late fees, you could also offer the client a discount of the invoice is paid before the invoices due date.
Know Your Value
Knowing how much to charge for your services is one of the most important tasks that every freelancer must face. If you charge too much, you may turn away clients. If you charge too little, it will be difficult to handle all of your expenses.
One of the easiest ways to determine what you should be charging is doing some research and see what the market rate is going in your industry. PayScale is a great resource to compare salaries. However, you can also use this formula created by Freelancers Union:
(annual salary + annual expenses + annual profit) ÷ annual billable work hours = your basic hourly rate
Another consideration is determining whether or not you want to bill by hour or project. Charging by the hour is easy to calculate, but clients may be weary because you could send them an invoice that is more than they initially imagined. If possible, try to provide the client with a rough amount of time it will take to complete a project.
Charging by project can be harder to calculate, which means you could undercharge or overcharge the client for your services. However, if the client has a quote, they may be more willing to move forward with the project since they can plan a budget.
Make it Easy For Clients to Pay You
We live in a world where electronic payments are easily and conveniently accepted. Instead of waiting for a client to send you a paper or electronic check, accept multiple forms of real-time payments like direct deposits, recurring payments, or using third payment gateways like PayPal. But, why stop there? You can accept payments through Square, Samsung Pay, or Apple Pay to speed up the payment process.
Also, be flexible with your payments. If the client can not pay the bill in full, discuss possible payment plan options.
Even if you have a contract in place, it’s in your best interest to stay organized with your paperwork so that if there any disputes over the project, an invoice was lost, or you received the wrong payment amount, you have evidence to back you up. The information that you should contain for each assignment should be:
- Name of the client and their contact information.
- The name and description of the project.
- The invoice number.
- Invoice due date.
- Total amount of the project.
- Any taxes that were taken out.
- The date that the invoice was sent.
- The date when the invoice was paid.
Typically, your invoice includes most of this information, so make sure that you have a backup copy. You can also save this information in a Spreadsheet.
Additionally, you also want to keep track of the hours that you work on a project with time tracking software. And, also keep note of the invoices that have been paid and those that are still pending. If this is too much work, consider outsourcing these bookkeeping tasks.
Use Invoicing Software
Not all clients require an invoice, but it’s still a good idea to send an invoice for each project that you complete since it will remind them that a payment is due. Thankfully, there a number of companies that provide top notch invoicing software that make this process a breeze – plus it makes you like look a professional.
With software like Due.com, you fill-out the contact information for both you and the client, include an itemized list of the services rendered, and when and how you expect to be paid. You then email the invoice to the client and you could be paid in a matter of minutes.
Another perk with using invoicing software is that you can automate your invoices. For example, if you have a client that pays you each month for a long-term project, you can create set-up recurring billing so that the client is automatically billed the amount of the invoice each month.
Implement a Follow-Up System
What happens when a client doesn’t pay an invoice? In most cases, a friendly email or phone call are enough to make the client pay the invoice. If that doesn’t work, what do you do next? You probably have to send a more formal letter or have your lawyer send a letter demanding payment. If all else fails you may no other choice but to take the client to the court.
How have you overcome payment obstacles as a freelancer?