Freelancers Guide to Getting Paid On Time

Freelancing is a gamble in many ways. One such way is that there is no payroll officer making sure there's enough cash in the bank to pay your (and your colleagues) salaries. Usually, this payroll officer will chase down all those pesky unpaid invoices. You barely even know… when you’re an employee. The harsh reality of freelancing or self-employment is that you will always have to be thinking about having enough money in the bank, making sure the tax is separated, making sure you have paid your suppliers and your bills. These burdens can be very easily exacerbated when it comes to looking at said bank account and client X hasn’t paid you, or client Y still hasn’t transferred the last part of their bill. Of course, many awesome invoicing solutions offer online payment options with reminders, but sometimes, it still isn’t enough. So, what are the best precautions to take to ensure you are getting paid on time? Cause cash flow is king.

Do your work and billing on time - it starts with you…

Ugh, I know! Personal responsibility. Frankly, you have to make sure your work is done on time and you have to make sure your accounting and bills are up to date. If you decide afternoon beers is more important than sending out an invoice to your client after you have done the work, then you can add one day onto the amount of time you will wait to be paid. It is that simple.

Similarly, you cannot send an invoice without having the work complete. So, you have to practice and nurture the discipline required to succeed working for yourself and always make sure the work is done and to the deadline your client requested. Now, let’s move on with the idea these two crucial steps have been completed...

Know the company or client you are working with

Most people will research prospective clients and companies. However, it is another crucial foundation step. Chances are, if a company regularly does not pay, there will be some information online about this. Often, this can happen when the offer is too good to be true. As a professional, you can see red flags like promised pay which is well above industry average for doing a similar job. Also, no logging of a method of payment or establishing how bills will be paid being offered by said company can be seen as a red flag. Ask your company contact for information on company billing cycles and payment schedules, ensure you understand how you fit into their financial plan. If a company can not provide this, certainly, there is a problem. That doesn’t mean you can’t work for them, that just means...

Get A Contract, Get It In Writing

Don’t believe a handshake, don’t believe in ‘lunch on the client’ - nothing is real, there is no deal until there is a contract or a formal, written agreement reached in writing. No, if’s, no but’s, no ‘but they were so nice…’. It just does not work this way. Legitimate businesses will know how important it is to at least summarise the scope of work and remuneration attached to it. Often, it is best to create a contract alongside a lawyer or industry professional and use it as a standard template. A one time fee can help you have a standardised way of protecting, outlining and reaching agreement upon your rights as a business person and service provider.

Get An Invoicing System That Works

Payday is a great day, but even then - as a freelancer or self-employed person - well, you have to put the bill together to make it all happen. There have been slow advances alongside technology - but the latest, and truly the greatest is integrated invoicing solutions. As an example, Kontist works with FastBill and Debitoor . Back in the day, perhaps 4 years ago even, the rise of digital accounting was bringing the attention of businesspeople, investors and the biggest companies in the world. There were some light attempts at integrating a bank into the accounting system. That seems a little backward - what about integrating the invoicing service into the bank? Well, with Kontist it is possible. This also sharply drives new forms of integrated electronic payment of invoices - client to service provider. This can dramatically speed up the payment timeframes of bills and again - automates a large part of accounting that otherwise would take hours of manual tasking.

Speed Up Invoicing Frequency

Yes, it is a pain. But, sitting down once a month to write invoices is probably not going to create effective cash flow in the business. As per your contract, invoice once the work is complete or on an agreed frequency if it is a regular client. For example: invoicing every two weeks. This means cash flow can be maintained instead of sitting there with the bank balance getting closer and closer to zero and the deadlines of bills loom. Don’t wonder if there will be enough money, plan for enough money to be there. This can also ensure your clients will be aware of more than one invoice is outstanding, as you can send a summary of accounts the next time an invoice is due.

Be A Business

There is a tendency especially for self-employed people to be misrepresented as ‘small’ and can occasionally invite the lack of preference by big-time companies. Some excuses can be about accounting and ‘getting lost in the queue’ but, often times the departments are overwhelmed and simply won’t adhere to guidelines because they are working through a line. That doesn’t help you get paid as per your terms. Be certain to make contact with your lead at the company, and ensure you know where your invoice has gone to. Offer to follow up with accounting yourself, because sometimes the ‘middle person’ is also overwhelmed. When you act like a business that needs to be paid, you are reflecting the truth of your circumstances. It should never affect your ability to secure more work with larger companies or jeopardize your current working relationship to ensure they are following the agreements made regarding payment.

The Follow Up

Yeah, this can be hard. Following up even politely via email can be the very last thing you want to bring to the table with a client. So, stay very friendly and stay very on point. Let them know the deadline has passed and ask when you could expect the payment as a result. Do these on a regular basis from the date the deadline has passed, for example, weekly - most especially if you are not getting responses. Should you continue not to get a response, call the office or persons in question and ask to discuss the matter. Remember to stay calm and kind, and focused only on having the outstanding payment made for services rendered.

Next steps

Obviously, going to a lawyer is a good option but certainly not the most affordable next step for most people. Nor is it particularly fast. At this point, it is assumed you have gone through the friendly follow up also. And, you will need to prove you have taken extensive action outside of a legal action. So before concrete legal action, you must send late payment notices/reminders. In Germany, they are known as Mahnung . It is standard practice to send three with the terms of payment clearly outlined, giving clear time frames for the company/persons to respond. Your Mahnung needs to be appropriately titled, and perhaps you can seek a lawyers assistance for standardised templates to use should you need to, and your notice should include:

Salutation: "Dear Mr ..."

Subject: "Reminder Invoice Number XXXXX"

Introduction: "According to our records, our invoice no. XXXXX of 26th May has not been settled." The enclosed copy shows an outstanding balance of EUR XXXXX. "

Middle section: "Perhaps this delay in payment is simply due to an oversight on your part." In that case, we would kindly ask you to remit the amount in question in the next few days. We would urge you to contact us. If there is a problem, maybe we can find a solution together."

At this point, both parties should seek to have the account resolved because legal action really should be a final resort. Ensure you reference the original signed contract between the parties that is the oversight on what the agreed terms were. Ensure you note that while further steps should be avoided, that you will pursue the matter legally and subsequent costs to the client may accrue as a result. It is certainly best to seek solid advice from qualified persons or government bodies before you would ever send such a letter, but, you can standardise the process once you have a clear idea of what that is.

Cash flow is the most crucial component to keeping on top of and maintaining a busy business - and hopefully, even if it is just you, there is a little bit of busy. Most clients are pretty understanding and mistakes can happen. That said, creating a process and procedure to bring into play in the event a payment is overdue can save a lot of hand-wringing and worry. Follow the steps and keep working with other clients, and always work to keep a strong relationship with the client who is late to pay. Your mission is to be paid for the work rendered and with a strong system in place you can ensure you have all the safeguards you need to make that happen. Onwards and upwards, a regular slate of reliable clients will reveal itself the longer you work in the game!