If you've ever waited and waited for a client to pay an invoice, you're not alone. Almost one-third of freelancers (31 percent) consider late-paying clients to be one of the challenges of freelancing, according to a survey of over 5,000 American freelancers commissioned by Freelancers Union and Upwork. Thankfully, there are some ways to encourage your clients to pay invoices faster.
Communicate a high level of efficiency and professionalism by sending an invoice at the same time as your completed assignment. This makes it more likely that your client will reciprocate.
Even if the client doesn't pay by the due date, you should still receive your payment quicker than if you had waited several days or weeks before submitting your invoice.
Reduce Your Payment Terms
Reducing your payment terms can encourage clients to pay faster because shorter payment terms give your invoice a sense of urgency.
Many freelancers offer standard payment terms of 30 days. However, in some industries, payment terms can be 60 or 90 days or even longer. If you reduce your payment terms from 30 to 14 days, there are no guarantees that your client will pay you within 14 days but you may receive your payment within 30 days. On the other hand, if you offer payment terms of 30 days, you may end up waiting for 45 days or longer.
Avoid saying that payment is due “upon receipt” or using such terms as “net 30.” According to research carried out by the cloud accounting company, Harvest, invoices that included these terms took longer to be paid than invoices that clearly stated “30 days” or something similar.
Include Specific Payment Terms in Contracts
Define specific payment terms in each of your contracts with your clients, so that the client knows exactly what is expected with regard to payment(s). Include the following information:
- The total amount payable in dollars or the currency of the client's home country.
- Your payment terms expressed as a number of days.
- The amount of each installment and the dates on which payments are due, if the client has agreed to pay in installments.
- The exact amount of a deposit or up-front payment that must be made before you start work, if this has been agreed with the client.
- Other terms and conditions relating to payment(s). For example, if overseas bank transfers are being made, the contract should state whether the client will cover all the international transfer fees or if you will pay for half of them.
If specific payment terms are detailed in the contract, your client will be more likely to remember exactly when payments are due and pay you accordingly. In the event of a late payment or a dispute over payment, you can refer back to the original contract.
If you don't already have a contract, download a template for a standard work-for-hire agreement from the Internet, adapt it to suit your business, and ask a lawyer to look it over before using it for the first time. Then, adapt this contract to suit each individual project.
Request Deposits or Installments
For longer-term and higher-value projects, it's a good idea to request either an up-front payment or a series of payments upon delivery of certain key pieces of work. Paying a number of smaller amounts rather than one large amount will help the client's cash flow and make them more likely to pay installments on time. Also, they'll want to maintain a good relationship with you while you're carrying out a long-term project for them, so they'll be more willing to pay you promptly at each milestone.
If you're working for a new client, they may not agree to make an up-front payment, unless you're highly recommended by people they know well. However, if you're carrying out a second or subsequent project for a client, they may be more amenable to paying a proportion of the cost of the project up-front because you have a proven track record.
Offer a Prompt Payment Discount or Freebie
If you offer a small discount for paying an invoice before its due date, some clients will be encouraged to pay early in order to obtain this discount. When calculating your rate for a particular project, include this discount in your calculations so that you won't be out of pocket if your client takes advantage of the offer.
Alternatively, offer a freebie if your client pays an invoice early. Make sure the freebie will be valuable for the client but won't take up too much of your time. For example, if you're a freelance writer, you could offer a 500-word blog post for the client's website on a subject you're familiar with.
Don't Give Up Your Rights Until You Receive Payment
If possible, hold onto the rights to use and amend your work until payment has been received from the client. For example, if you're designing a logo for a client, you would only show them printed and watermarked versions of the logo before payment is made. You would then send the files that allow the client to use and change the logo. This should encourage the client to pay as quickly as possible.
In order to avoid misunderstandings, include a clause in your contract which states that the files giving the client the ability to use the finished product will not be sent until the final payment has been received.
Get to Know People in the Client's Accounts Department
Unless your client is part of a very small business, your invoice will be handled by someone in the accounts department. Therefore, it's important to find out who is responsible for processing and paying your invoice, and build up a good relationship with them.
Ask your client for the contact details of the relevant accounts clerk or manager. Call that person and ask them if they've received your invoice and whether it includes all the relevant details. If the invoice becomes overdue, contact them again and ask, in a polite and friendly manner, if there are any problems with your invoice.
Most freelancers have some clients who pay early, some who pay on time, and others who are late-payers. Do all that you can to increase the probability of your clients paying you quickly. If one or two clients remain persistent late-payers despite all your best efforts, consider replacing them over time with clients who show that they value your work by paying you promptly.
Need a good invoicing software? I highly recommend Freshbooks.