Get the Money That’s Due to You AND Still Keep Your Clients

You’re about to discover how to face the one task that most freelancers probably dread–collecting a late payment.

When a client is late making a payment, it can set off a whole horrible negative train of thought starting with “I’m not going to be able to make my house payment/rent” and ending with “Did this client hate my work?”

But worse than the negative energy that a late payment creates is the very real fact that, like most freelancers, you rely on receiving your payments in a timely fashion so that you can live.

This is true, unless, of course:

  1. You’re independently wealthy and freelancing is your hobby.
  2. You live with mom and dad and freelancing provides your fun money.

If those two points apply to you, you probably won’t care much about this post. For the rest of us, though, a late payment is a serious thing and a seriously late payment is a dreaded thing.

In this post, I’ll explain how you can develop a proactive process to minimize the number of late payments that you face. I’ll also explain what to do after a payment is late.

Develop a Proactive Freelancing Process

The first thing you need to do to make sure that you get paid on time is to develop a proactive process. This means that you are taking steps to make sure that you get paid before you even start to work.

Here’s an example of a proactive freelancing process that works for me:

  1. Research new clients thoroughly. Chances are, if a company is in the habit of cheating freelancers, somebody has already complained about them.
  2. Make sure that you have a written agreement with every client even if it’s only an email. The agreement needs to be as specific as possible regarding payment terms. Include when you are to be paid, how you are to be paid, and the amount you are to be paid.
  3. Require new clients to submit a partial payment up front. This policy weeds out many scammers and others who are just trying to get you to work for free.
  4. Always invoice promptly. Don’t assume the client will pay if you don’t send a bill. Most clients need a bill to start their payment process.
  5. Have a plan in place. Don’t wait until a payment problem occurs and try to solve it in the heat of the moment. It’s best to draft a few late payment letter templates before you need to use them.

Here are a few additional tips that I’ve learned over the years:

  • Tip #1: Large companies often take much longer to pay. That is because payment approval goes through several departments.
  • Tip #2: If you have an especially large project, get the client to agree to break it into phases with a payment due at the end of each phase. This way you don’t have to go for a really long time without getting paid. This also gives you some leverage because if the client doesn’t pay for a phase, you can halt work until they do.

Of course, being proactive won’t completely protect you from late payments.

It’s Really Late–Now What?

The payment due date has come and gone and there’s still no sign of payment. Now what should you do?

While you may feel like sending an angry rant to the client and posting their name all over the Internet as a non-paying scumbag, this is NOT a good approach.

Rather, you should remain professional, but firm, in your communications with the client.

Remember, it’s possible that the late payment is due to an honest oversight. Clients are human too. If you lash out at the client, you will destroy a relationship and possibly your own reputation.

A good initial collection process follows:

  1. Start with a friendly reminder email. Keep your tone light. At this point, assume that the nonpayment is an oversight. Attach a copy of the bill you sent. For many clients, this reminder step is the only step that you will need to take. The nonpayment really is a simple error on the client’s part. Best case scenario: you get the money that’s due to you and you still keep the client.
  2. Send a firmer letter. If a few days have passed and there is still no response from your client, it is time to take a firmer stance. Without making threats or using emotional language, let the client know that this is a third billing and the payment is now seriously overdue.
  3. Make a call. Many freelancers hesitate to pick up the telephone to collect a late payment, but sometimes that is what it takes. Again, be polite and take a firm, but professional tone with your client.
  4. Send another firm letter. Repeat this as often as needed.

When it comes to collecting money, it is often the squeaky wheel that gets the grease. If the client sees that you aren’t going to let the matter drop, they may pay just to get you to stop bothering them.

Should I Get Help?

Many freelancers wonder whether they should sue a nonpaying client or hire a collection agency.

The answer is, that depends. I certainly wouldn’t turn to an attorney or an agency until I had followed the process above.

Consider how large the outstanding payment is. Most attorneys and collection agencies will not work with you for a small payment. But you may wish to bring in the “big guns” if the client owes you a lot of money.

This is where your client agreement becomes important. If you don’t have a written agreement of some type, you may not even be able to collect. (Although, emails sometimes count as a written agreement.)

Another factor to consider before getting collection help is that an attorney or collection agency will take a percentage of any money that is collected.

Your Turn

Have you had to deal with a client who was late in paying you? How did you handle it?

Share your tips and experiences (no client names please) in the comments.