The Nitty Gritty Details Freelancers Need to Know About Getting Paid

You’ve just taken the leap into full-time freelancing. It’s a great move, but there are a few things you need to know about getting paid.

When you were an employee, you probably got paid every pay period (usually every two weeks or sometimes weekly) pretty much automatically.

Well, guess what? Getting paid isn’t automatic for freelancers. Instead, you have to arrange for payment and you should do it before you ever start working on a project. You have to make arrangements to be paid each and every time you get a new project.

In this post, I’ll discuss some of the nitty gritty details about getting paid that you need to know as a freelancer.


Agree on Payment Terms

Before you do a single task for your clients, you both need to come to an agreement on payment terms. Make sure that you and your client both understand when the payment is due and how the payment will be made.

Get your payment terms in writing so that there’s no confusion later on.

Get a Deposit Up Front

The next thing to remember is that you should always get a deposit before you start work. Typically, your deposit should be between 30 to 50% of your total estimate for the project.

Not only does getting a deposit up front protect you from clients who don’t intend to pay you at all, it also means that the client has a stake in your success since they’ve already invested some money into it.

Make getting an initial deposit part of your standard practices.

PayPal

By far the most common tool that freelancers use to get paid is PayPal. PayPal allows you to create and send invoices. Plus, your clients can pay you from their own PayPal account or using a credit card. They can even transfer money in from their bank account to pay you.

When it comes time to get your money, you can transfer it to your bank account (usually takes several days) or use a PayPal debit or credit card. You can even have PayPal send you a check

The drawback to PayPal, of course, is the fees. The service charges a small fee for every transaction.

Google Checkout offers an alternative to PayPal.

More Acceptable Ways to Get Paid

Another acceptable way to get paid is by a paper check mailed to your address. I still have some clients who prefer to use this method of payment. The biggest drawback to receiving a paper check is the time delay while the check goes through the mail system. Although it’s never happened to me, the check could also get lost in the mail.

Barter can be an acceptable way to get paid, but only if you are bartering for something that you would ordinarily use anyway. Remember that bartering won’t pay the bills, so only accept a barter exchange if you are already earning enough to get by. Also, be sure to keep track of the value of the items involved in the barter since you will need to report this transaction on your income tax form.

Direct deposit is not generally available for a freelancer, although some bidding sites do offer this option. Most clients will not do this unless you are on a long-term project. If you decide to use direct deposit to receive payment from a client make absolutely certain that you are dealing with an ethical individual before you turn over your bank account information.

Some Unacceptable Ways to Get Paid

Believe it or not, cash is generally not a good way to get paid. For one thing, cash can easily get lost or stolen in the mail. Also, cash doesn’t leave a very good trail for your accounting records. At the end of the year, the amount of the cash you actually received could become a matter of debate between you and the client.

Contingency payments, such as an agreement that your payment will be a portion of the client’s profits (if there are any), are often bad deals for the freelancer–especially if there is no other form of payment. This is usually a bad deal for the freelancer because he or she has no real control over whether the client’s venture becomes profitable or not. If it is unprofitable, the freelancer may never get paid.

Send the Invoice as Soon as You Are Done

As soon as you finish the project send in your invoice while your work is still fresh in your mind and in your client’s mind. Don’t dawdle or put off sending it out. The sooner you send out the invoice, the more quickly you will be paid. Don’t give your client a chance to move on to other things.

Reminders About Tracking Income

Regardless of the method of payment, it is important to keep an accurate record of all income received. In the U.S. you will be responsible for reporting all income received on your tax return whether the client sends you a 1099 Form at the end of the year or not.

Accurately tracking your income also gives you a picture of just how well your business is doing. You can also determine whether you are meeting your expenses.

Your Turn

I hope this post helped to answer any questions that you might have about how freelancers get paid.

Did I miss any tips for getting paid? How do you receive your freelancing payments?

Share your answers in the comments.

How To Get More Clients

Get More Clients

Tired of struggling every month to find new clients?

Join us for our latest workshop and build your own custom marketing plan. Conrad Feagin - the Chief Executive Freelancer at FreelanceFolder - will guide you step-by-step.

The workshop includes live classes, expert support and one-on-one coaching.
Learn more here.

Comments

  1. says

    1. Make sure the person you a negotiating with has buy authority.
    2. Make sure the organization buying has money and property and is not leasing assets to work with before taking them to small claims court.
    3. When negotiating a new assignment with a client from whom you collected pass due accounts through a collection agency that you add the amount that the collection agency earned to your new assignment.
    4. There is nothing wrong with cash in advance or COD.
    5. I’ve notice when I’ve gone in to see if I could get them to pay me I be sent to accounting where the head account would go to a file cabinet marked AGING where my check was stored.

  2. Saffron S. says

    I don’t know about anywhere outside of Canada, but I love online bank-to-bank money transfers.

    If both you/your shingle and the client have online banking set up, the client can set up a money transfer direct from account to account. All they need is your email address, and all you need is the password to automatically download the money into your account.

    No one needs to know anyone else’s bank info at all, and it cuts out the middle-man (ie: Paypal) entirely and means you have the funds (ALL the funds) immediately.

    I also take company cheques (not personal ones), but my TOS states cheques can delay forward movement on the project if they have to be held for 5 days to clear. So far I’ve never had a problem with those stipulations in place.

  3. says

    I pay a $30 fee per month to PayPal to accept most major credit cards. It allows me to get paid much quicker than normal. The downside of course are the fees.

    I’ve never had to sue anyone, but the moment I did I found out the company was going under and when a company is incorporated, you can’t sue individuals – only the company. So I’m just out the money.

    On projects that exceed $400 I always ask for a 25% deposit and I spell out progress payments in an extensive contract. New clients always pay a bigger deposit. When I’ve worked with them for a while, I allow Net 30 payments except on printing costs. I require 100% printing costs prior to printing any project. If they can’t afford printing right away, the project waits.

    Great article Laura!

  4. says

    Gold–Great added tips about negotiating and especially dealing with the right person.

    Saffon, Most clients that I’ve had don’t offer bank-to-bank transfer, although I imagine there may be some that offer it for larger and longer-duration projects.

    Hi Christina! Thanks for sharing your experience. I’m sorry that you lost money when dealing with corporation. I always advise freelancers to check potential clients out very carefully–but sometimes even companies with stellar reputations go under…

  5. says

    Thanks Laura.

    I had been doing work with this company for over 10 years designing their magazine. Then all of a sudden….. Well anyways, you get the idea. I do agree it is always best to check out clients. I certainly always have.

    It was a major surprise. Already talked to a lawyer and they’ve told me not to pursue because it’s a waste of my time and more money.

    :)

  6. says

    “Send the Invoice as Soon as You Are Done” – exactly!

    Too many times have I finished a project and forgotten to send an invoice right away. I get caught up in other projects or work and before I know it a month later I realize I forgot. It’s best to get into habits / routines with clients as those process’s usually work out best for keeping you on target as well as getting paid. When I’ve forgotten in the past to send an invoice for a while, it’s not surprising that when the client does get the invoice they are questioning what this is for, why it’s so late, “are you on top of your stuff”, or whatever.

    Thanks for the great post

  7. says

    Christina–Once again I’m sorry to hear what happened. Sometimes, despite our best efforts, these things do happen. :(

    Azunga, Good point! If the invoice is late it does appear to the client that you are not on top of things.

  8. says

    I’m really curious, why would bank to bank transfer not be standard? In the UK, payment by BACS is the way everyone gets paid, any other way would be seen as pretty strange. Are bank transfers that much more difficult in the US? Is online banking not standard? In the UK we just include our bank account and sort code on each invoice – to be honest even amongst friends, it’s pretty common to transfer money to each other (for example, if someone books a load of concert tickets and you need to give them the cash)) by giving the other person your bank details. It would never even occur to me to ask to be paid by PayPal and a client would certainly think it strange. Is US banking that different? Genuinely curious!

  9. says

    Great post, Laura.

    If you have negotiated payment terms and/or progress payments and your client doesn’t meet those milestones, stop work. Keep the deliverables until your invoice is paid according to your agreement.

    Quickbooks now has a link that I put on the bottom of my invoices that allows a client to pay my invoice directly and it only costs me 50 cents. That’s a huge savings over my merchant account and Paypal.

  10. says

    Another great post, Laura!

    Suzette, I’ve been doing that technique for a year now. I had a client who kept paying me a month after sending the invoice. I told him that I would stop working if he doesn’t pay within a week. I can say that it is very effective.

  11. says

    Good post. I’d advise against PayPal generally for the fees but if you’re in a country where bank transfers are more problematic (I’m UK based), the time saved may outweigh the cost.

    I’d say one of the most important things I’ve learnt would be nailing down an awesome accounts program that fits the way your business works and getting a good accountant in tow; when you start earning decent amounts they’ll pay for themselves.

    Also, on the Direct Debits thing, I’d advise if you’re entering an ongoing relationship to make the client use some kind of formalised, monthly bank transfer scheme; doing it via cash means they end up letting invoices ride until the cost becomes unmanageable in my experience (along with the problems noted above).

    Thanks for the great post; some good advice in there!

  12. says

    Good article and I enjoyed reading the comments. I absolutely agree with some of principles outlined that you have to talk about payments with your clients early and often! Not everyone is trying to get away with something — they are just generally confused sometimes. So you have to articulate these things very clearly, and in writing! (In my contracts now, I even have “d’oh” type language to the effect of “payment of an invoice is required by the due date listed on the invoice”. You’d think that would be obvious, but it’s amazing that sometimes people just don’t realize that’s the case.)

    I also am not tying my payments to my client’s schedule. In other words, if the contract says I don’t get paid until I finish X out of Y features, well then guess what? If I can’t finish those features because the client is totally late with giving me the information I’ve requested…then I’m not getting paid! Which is bad. So I go by timetables instead. If you specify payments on dates rather than on finished features, you will get paid. And the client will actually hop to it to get things done! It’s amazing. :)

  13. says

    Getting paid is one of the most difficult things in business I have found. When I first started my business that was one of the last things I was worried about (go figure).

  14. says

    What about using Stripe? I use them for just about everything! I’ve even started using Stripe for one off payments. There’s a sweet little addon to stripe called easybill (www.easybill.co) that lets you create quick payment forms connected to your Stripe account with oauth

  15. says

    Thanks for the tips Laura. In my experience it often takes longer to get paid than it does to do the job in the first place!

Trackbacks

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>