How do you get paid on time?

Posted on: June 23rd, 2010

As freelancers, we all have regular monthly bills to pay BUT we don’t have the luxury of a fixed amount paid into our bank account on the same day each month. What can you do to ensure you get paid on time?

There have been many times when I’ve been owed several thousand pounds by clients but the money is sitting in their bank account and not mine. If your experience is anything like mine, you’ll know that some companies are notoriously slow at paying. Up to 90 days isn’t that unusual.

I’ve found that it is possible to change these terms, since not all payment terms are set in stone. One client of mine has terms of 60 days and mine are 30, so we agreed on 45.

Like me, you’ve probably heard every excuse in the book about why our money hasn’t been paid to us.

“The accounts lady is sick.”

“The accounts lady is on holiday.”

“We lost your invoice.”

“I’m still waiting to get the invoice approved.”

“We posted a cheque book to our book keeper but the postman’s cart was stolen and the cheque book was in the cart.” (Actually that one turned out to be true!)

My ‘how to get paid on time’ tips

  • Send in your invoice as soon as you’ve finished the project. Don’t wait until the end of the month. Then, follow it up a week later with a statement. (Some companies only pay once they’ve received a statement.)
  • Get to know the people in your clients’ account departments. And be friendly to them at all times. Phone them as soon as an invoice is overdue and ask when you can expect to be paid. I usually find I have to make three phone calls – persistence and friendliness usually pay off (and up.)
  • If a client is REALLY dragging their feet about paying you, there’s always the small claims court (if you’re based in the UK). There have been two occasions when I’ve had to resort to this but it really is a last resort because you won’t hear from that client ever again. But, to be honest, would you want to do any other projects for a company that treats you like that?

What if a client goes bust owing you money?

If a client goes into liquidation owing you money, it’s unlikely you’ll see any of that. It happened to me once – I was owed £2,000 by a design agency that folded. It made me realise that charging a percentage upfront for new clients is a good idea. If possible, try to charge 50% upfront.

And keep your ear to the ground about how a company is performing. If you sense any warning bells about the financial state of a client – and there are plenty sounding just at the moment – don’t take on the project.

My experience is that the larger the organisation, the longer they take to pay. The exception is the public sector – they now pay extremely promptly (within 14 days here in the UK).

What’s your worst experience about clients not paying you?

16 Responses to “How do you get paid on time?”

  1. Cookies & Java
    June 23rd, 2010

    Generaly speaking I’ve had a lucky run but the worst I’ve, and a common experience I’ve seen, is the “I’ll pay you when the client pays me” claim by an agency.

    In my case the agency had wedged itself between myself and end client but hadn’t realised how close my relationship with that end client had become. I knew they had been paid and were simply holding back the money. In my case I took the agency out of the equation by taking the client on direct which cost them their healthy retainer.

    I echo the points you have made, I myself have negotiated long supplier payment terms by half, even when it’s supposed to be company policy. I also support the attitude of being friendly and helpful at all times with the financial department.

    In addition to this I would suggest forming relationships with staff as high up in the company as possible, this will give a better insight into how the company is performing plus give you leverage on the financial department should you need it. Generally managing directors don’t like unhappy suppliers. As a last result you can also hold back and withdraw deliverables but at the expense of the relationship and only if your industry type gives you the option.

    Other tips I’ve picked up but haven’t tried are offering an early payment bonus, penalising late payments with a percentage charge and offering more flexible payment types which staff can make payment through directly such as online credit card processing.

    I’ve also had cases were being willing to be paid directly via BACS rather than requiring a cheque increases the odds of being paid on time.

    From my own experience I cannot generalise based on company size, type or sector. I’ve had both great and terrible payers of all sizes.

    Chris

  2. Carole
    June 23rd, 2010

    Yes, late payment penalties can work, Chris, as I know some companies move those invoices to the top of the pile. And your final comment is certainly my experience as well – terrible payers come in all shapes and sizes of organisation.

  3. Jaffa Brown
    June 23rd, 2010

    I use three methods…

    1) Use an automatic accounts system (like Freeagent or one of the others) – I have mine set to remind every other day after late payment – so you nag them to death by email.
    2) As stated, late payment charges. My T&Cs clearly state that in the event of an invoice being over 10 days late, I will raise another invoice for £50 admin fees (if the banks and c/card companies can do it….)
    3) High interest charges on late payments

    The fun is really when somebody pays late, and you invoice them the £50 late payment fee, they pay the original invoice, so another small invoice for the interest (as per T&Cs clearly stated on the interest invoice with the ref of the original invoice and PO number), and then they pay both the fine and interst payments late.

    Had that happen once, I actually had the MD of the company phone me up begging for us not to raise another £50 fee. I of course cancelled more late payment invoices being raised (and actually cancelled the interest invoice) on the clear understanding the late payment invoice woul dbe paid (it was) and they never late paid me again (they havnt).

    Have to repeat, having an automatic email chase system and late payment invoice system in place saves all the chasing – it all happens whilst you sleep.

  4. Carole
    June 24th, 2010

    Sounds like you have an efficient system in place, Jaffa. I’ll look into Freeagent…thanks for the tip.

  5. Lee Lefton
    June 25th, 2010

    Here’s a little ditty about staying on the good side of the accounts payable people. And it happened today. I have an agency that’s at 45 days. I sent an e-mail to the accounts payable person at 35 days as a gentle reminder. No response. So, at 40 days, I called and left a message on voicemail. Still no response. Finally, this morning, I e-mailed the art director who hired me and asked if she could run interference and find out what the problem was. Well, about 1/2 hour later, I got a fairly brusque e-mail from the accounts payable person telling me that hadn’t received any messages from me (which is what she always says, and the fact that my e-mails to her never bounce back makes me suspect), and that she didn’t appreciate me going through her art director. Hmmm. How to handle a pissed off billing person when I’m the one who’s really angry? Well, after fuming for a couple hours, I jotted a brief note telling her that I was concerned about not hearing back from her, and was sorry that she perceived that as me going around her. I guess that placated her as I received an e-mail at 10 pm this evening saying she would be sending a check tomorrow.

    It’s extremely frustrating because this kind of nonsense is happening more and more.

    As to the excuse about agencies waiting to pay their vendors until their clients pay them, that’s what lines of credit are for. We have NEVER been late on a vendor payment in 30 years.

    One more brief story about why it pays to be nice to the people who pay us. I did a $20,000 job for an agency years ago. They paid me $5,000 and when I’d finished the work, I was told by the creative director that the agency had gone bust and they weren’t able to pay their vendors. People were making threatening calls to the owner, having their attorneys send letters, etc. So instead of taking that path, I wrote a short e-mail to him saying that I’d appreciate it if he could pay me when he was able. I guess it really is easier to catch flies with honey than with vinegar. I got a check for $15,000 the following week.

  6. Cookies & Java
    June 25th, 2010

    This is why you can’t rely on email for communications. It’s just too easy to deny they’ve been received.

    I know of a finance director who will print all the cheques off, pop them into addressed envelopes and keep them all on his desk. Only once a supplier phones about late payment will he shuffle through them and exclaim “Oh it’s just here on my desk ready to go, it’ll be in the post tonight!” Otherwise they never get sent.

    You’d think finance directors would have better things to do than play games with suppliers. I know cash flow can be a critical problem for some businesses but the answer is to communicate.

    I think the technical sophistication of the finance department can make a difference, I still see a lot of businesses relying on cheque runs which need signing off by multiple directors. Every payment they make is a painful process of entering it in the system, printing, signing and posting. Whereas some departments can just enter it into the system and it gets paid into the suppliers account on the dot. I’ve known some automatically audit the PO’s raised by departments and alert them invoices haven’t been put through.

    And of course a patient courteous manner can result in more than just being paid on time, it can mean being paid earlier or even receiving large lump sums in lieu of future orders.

  7. Carole
    June 25th, 2010

    Interesting stories. I know of some companies whose accounts depts don’t pay until they’ve been chased three times for payment. Then they pay.

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  15. Carole
    July 25th, 2010

    @physician assistant – thanks for your comment. Much appreciated. :)

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