Sole proprietors and freelancers don’t like talking about money but need to develop ways to do it. The incidence of late payment has increased as the economy has worsened and the self-employed need to protect their business interests.
1. Make sure clients understand payment terms before the project starts
Clients may not be as focused on the payment terms as the service provider. Making sure that clients are clear about the terms by talking them through up front - including discussion about exactly what is covered and when payment will be expected - sets the project up for success. Assuming the client understands everything without discussion may result in delay or other nasty surprises and being clear about money is easier at the start of a project than half way through.
2. Insist on advance deposits or retainers
Taking an advance deposit or retainer payment against a certain number of hours has two benefits. Firstly, it ensures that the client is serious about committing to the work at this time. Secondly, if the project goes south the freelancer or sole proprietor is at least covered for the initial portion of work completed. Ideally payment terms should be structured to allow for interim payments at agreed milestones during the project. If the interim invoice is not paid, the service provider can stop work on the project and protect herself that way.
3. Call clients a day or so before payment is due
Sometimes people get busy or disorganized. Calling up a client with a friendly reminder that the invoice due date is approaching can be an effective way to prompt them to action.
4. Follow up quickly on late payment
If an invoice goes unpaid,following up quickly is the best approach. The initial follow up should assume that there is some minor delay, forgetfulness or process issue at the client’s end. Further follow ups should take a stronger line.
5. Offer options to co-operative clients
The economy is affecting everyone. Sometimes clients set out in good faith but find themselves in more difficult cash flow circumstances than they expected. A payment plan, where the invoice is broken down into smaller monthly payments, for instance, may be a good option for clients in this situation . This makes the freelancer look professional and problem-solving, helps out clients who appreciate working with providers who show willing to be flexible and ensures that the freelancer sees payment in some form.
As these tips demonstrate, the most important thing for freelancers, the self-employed and small businesses is to make it as easy as possible for clients to do what you need them to do by being clear and direct.
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