How to Deal with Late Payments and Make Sure You Get Paid as a Freelancer
Late payments are something that all freelancers and small business owners have to deal with sooner or later. It shouldn’t be like this, but unfortunately it is.
Not getting paid or having to wait for money to come through from clients can be extremely stressful. And it’s so frustrating. You’ve done all the work and kept to your end of the bargain, so there’s absolutely no reason for your customer not to do the same.
In my experience over several years of managing projects involving freelancers and now hiring other freelancers for my own team, I’ve discovered that it’s really not that hard to pay an invoice by the due date. Personally, I’ve never once paid an invoice late, and there shouldn’t ever be any real need to.
However, there are certain types of customers who tend to struggle more than others when it comes to paying invoices on time. In this blog post, I’m going to run through these different kinds of clients and give you some suggestions for how to deal with each one.
Although you can’t force a client to pay you, there are some things you can do to avoid late payments or deal with them in the right way when you find yourself faced with an overdue invoice.
Customers who don’t pay on time
1) The big-company customer
Larger companies sometimes have fixed dates for issuing payments for invoices. If they only pay on Tuesdays or on the 15th of the month, for example, this could mean that your invoice might not make it into the next payment run and won’t be paid on time.
If your client works this way and can’t meet whatever due date you put on your invoice, you should know about it in advance. If this hasn’t been mentioned and you are about to start a new collaboration with a large company, ask them how they organise their internal systems and when you can realistically expect to be paid.
2) The disorganised customer
In the same way that many freelancers and small business owners struggle to stay on top of their admin, you might find you have a customer who is facing the same stresses and strains.
If I haven’t received payment by the due date on my invoice, I tend to email my clients on the same date with a reminder. Most of the time, my invoice has simply slipped their mind, and they usually pay it straight away.
Our clients are busy people too, and we can’t expect our invoices to be their number one priority. Having said that, we deserve to be paid in accordance with the terms we agreed, so it’s important to chase up any missing payments straightaway.
3) The cash-strapped customer
There are occasions when you may come across customers who are in financial difficulty.
It might be the case that they don’t have the money to pay you right now and are therefore putting off paying your invoice for as long as possible. This kind of customer might be grateful for the opportunity to pay your invoice in smaller chunks. Is this something you could think about offering them?
Otherwise, it might be that they haven’t got the money to pay you at all. In this case, unfortunately, there’s very little you can do about it. The important thing is that you don’t accept any further work from customers who owe you money until all their invoices have been paid.
If they don’t have the money to pay you, it really isn’t fair of them to ask you to do any work. I’ve heard of freelancers not being paid on time because the agency they were working for hadn’t yet received payment from the end customer. But in my opinion, this isn’t an excuse. If you’re not 100% sure you’ll be able to pay someone, you shouldn’t be asking them to do any work for you in the first place. And if you need payment from the end client to be able to pay a subcontractor, you should insist on receiving partial or full payment from the customer upfront.
4) The mean customer
This kind of customer just doesn’t want to part with their cash. They pay late simply because they aren’t very nice clients and don’t really care about you. With these customers, there will always be a risk of late payment for every future project, so you might want to cut ties with them as soon as you can.
What to do if a client doesn’t pay
With the mean type of customer, if you send your client a reminder and they don’t respond, you could consider taking legal action (or threatening it, at least).
Legislation around payment practices differs by country, but you may be entitled to add interest to late payments. In this case, I send the client another email soon after the due date stating that their payment is now overdue and they will incur interest for every day that the payment is late, unless they make payment immediately. It helps if you’ve already included a statement to this effect on your invoice when you issued it.
If the client still doesn’t respond, I send a more formal email threatening to take legal action if I do not receive payment by a certain date. Given that most of my client projects are not of a particularly high value, it’s extremely unlikely I would ever decide to take legal action. But in the two cases where I’ve had to threaten this in the past, the threat itself has been enough to get the client to pay.
How to make sure you get paid as a freelancer
As freelancers and small business owners, although nothing will make a client pay our invoice if they don’t want to, there are several things we can do to encourage our clients to pay us promptly.
We can make payment easier for our customers by putting buttons on our invoices and offering different payment methods, such as bank transfer, credit/debit card, direct debit, etc. If customers can pay in the way they prefer and however they find it easiest to make payments, they’re more likely to do it straightaway.
It’s also important to make sure you agree payment terms upfront and always include them on your invoice. Otherwise, the client might argue that no due date has been specified and take as long as they want to pay you.
Finally, I’ve often heard freelancers say, “I knew they weren’t going to pay me.” Having a sixth sense for these kinds of customers can be a really valuable business tool. Having the courage to use it often only comes with experience, but if you get the feeling a client isn’t going to pay you, why not listen to what your gut is telling you? There’s usually a well-founded reason for why you feel this way!
No matter what kind of client you’re dealing with and the circumstances you’re faced with, it’s always best to follow up on overdue invoices as soon as possible. Letting things get too far down the line isn’t good for you or your customer; you’re left waiting for your money, missing out on valuable income you’ve worked hard for, and the client doesn’t receive a reminder to pay you.
If the thought of chasing up overdue invoices terrifies you, you might want to consider a 1:1 custom mentoring call. I’ll offer you advice on your specific situation and can even help you with email copy to confront whatever problem you’re dealing with when it comes to getting paid for services you’ve provided.