Piecing together a steady stream of work and keeping on top of your finances are two skills every freelancer needs to master early on to cut it as a solo worker. Still, often it's getting paid–-and paid on time—that can become a freelancer's biggest hurdle. The work is done and delivered, yet you're still sitting on thousands of dollars in unpaid invoices.
It's a common complaint for independent workers across industries. In a recent survey by the Freelancers Union, nearly half of participants reported problems with getting paid. According to Sara Horowitz, labor lawyer and founder of the Freelancers Union, member freelancers are owed more than $10,000 in unpaid invoices and spend an estimated 36 hours tracking down each missing payment.
The Freelancers Union has been vocal about the need to hold companies accountable for paying contract workers on time–-even launching a public ad campaign on New York subways this month to address the issue. Some startups are seeing this as a business opportunity. Fundbox, for example, focuses on lending to startups to help them pay freelancers without delay; Harpoon offers financial planning, invoicing, and goal-setting app features for freelancers; and sites like Shake let you create and send legally binding agreements.
But while advocates and startups are galvanizing around the issue, there are still practical and essential steps every freelancer should follow to protect themselves and take matters into their own hands.
Often the issue of not getting paid on time can be avoided altogether if you know the problem signs to look out for when approached by new clients, says Ilise Benun, author of the book The Creative Professional's Guide to Money. "Before you even get to the contract and deposit stage, you need to know what the red flags are for the problem clients," she says.
Benun identifies fives types of problem clients to watch out for:
1. The chaotic client: This is the person who flakes on every meeting, is always late, canceling, rescheduling, or seems constantly frazzled. We all encounter some chaos in our workdays, but if you're working for someone who is continuously in a frantic and forgetful state, chances are they won't be the most timely when it comes to getting you paid.
2. The clueless client: They want to hire you, but don’t know what they want and need and how much it ought to cost. From the start, work to establish clarity with this kind of client, but if they really don't know what they want and aren't willing to pay your rates, you're better off not getting involved.
3. The jerk: You know who they are. It can be easy to spot these problem clients from the get-go. If they don't treat you with the kind of respect you're giving them, trust your gut and avoid the headache.
4. The cheapskate: Everyone wants a good deal. But remember what your rates are and don't let anyone try to talk you into giving them a lower rate because they're being cheap. "It could be that they don’t know what it should cost and you have to educate them," says Benun. That, "or they are really cheap and don’t value your services in the first place."
5. The big bore: Often work opportunities come up that really don't excite you. There's nothing wrong with the client per se; you're just not into the work. "It's a red flag when you don’t want the project," says Benun. Hard as it can be to say no to work, if you really don't care for a project, there's a good chance you won't do your best job and might build resentment towards the client hiring you.
The bottom line, according to Benun: "Protect yourself by saying no to the bad clients."
Say your client doesn't raise any major red flags and you're ready to start a new assignment. Take time to consider what the particular job means to you, says attorney Nicole Page, partner at Reavis Parent Lehrer LLP, where she specializes in entertainment, intellectual property, and employment law. Are you in it just for the money? Do you care about the ideas and work you're producing and hope to do something more with them down the line? Think this through in advance. "It's hard when you're just trying to build a career and get your work out there," says Page. "But you need to think: 'What do I want to do with this piece of material?'"
Thinking through what work means to you is important, because you'll likely be signing some sort of copyright agreement that either passes off all rights to the client or enables you to license the work for a certain period of time or limited use. "If you're contributing something of a creative nature, it might be very important to you, whether it's an ownership deal or a licensing deal," says Page.
Typically, there are three common options when it comes to ownership:
- Work for hire: Everything you create is treated as if it was created by and for the client exclusively. They own the copyright and can do with it as they please.
- A license: You license the use of the work for a certain amount of time or on a certain platform, but the copyright ultimately comes back to you.
- A straight buyout: This has the same result as work for hire. You've created the work, and the client then buys all the rights for it.
Don't let the idea of an official contract scare you. "A written contract doesn't have to be a really long involved legal document, which people tend to get intimidated by," says Stephen Fishman, legal expert and author of the book Working for Yourself. As long as the fundamentals of the job are covered—who you are, what the job is, how much you're getting paid and when, and who owns the work—you should have the basics covered. That said, it's always important to have some sort of written document outlining these details—even if it's an email or a simple letter agreement. Online resources like Shake offer a fairly easy way to generate contract agreements including your specific project details.
Page advises freelancers ensure certain specifics that too often get left out of contracts. For writers, for example, it's important to indicate how many rounds of comments and rewrites are part of the project. Commit to two rewrites, and anything after that would require that you get paid an hourly or day rate for additional work.
A clause that protects you against legal claims and one that indicates a specific pay period—be it 10 days, 15, 30, or more—must also be included so that clients know what window of time they have to pay you in upfront, says Page.
Freelancers can get a bad rap as being flakey or unprofessional when they don't follow those basic business procedures. "The biggest thing I tell people is read what you are signing. Don’t just sign it. Think about it. Don’t be afraid to ask questions," says Page. "People think, 'If I ask, the deal is going to go away.'" But that's simply not true. "Look at it like: 'This is my business,'" she says. "You have to learn how to be a business person."
People often find talking about money extremely uncomfortable. But avoiding the topic is a major mistake. "A lot of people have problems talking about money in the first place, especially if they are charging hourly and not letting the client know how much money and time is being racked up," says Benun. Be sure to communicate how much time you've put into work throughout the process to make sure clients don't feel sideswiped when your invoice arrives. "You have to over-communicate," says Benun. "Just make it part of your process to send your client a regular update of where you are budget-wise."
It's inevitable that even after taking all the right steps, your payments still aren't coming in on time. When following up on invoices, there are a few fundamentals to keep in mind. Often the problem isn't that a freelancer doesn't have a contract in place, it's that they aren’t using it properly. "It needs to be done in the most impersonal way possible," says Benun. "You really have to be very professional about it."
Revisit your contract. If a payment is past the window of time you specified it should be made in, let your client know the payment terms have been breached. "Don't harass immediately," says Benun. Often late payments are a result of miscommunication, invoices getting lost in the shuffle, or other internal hiccups. If it's been 32 days since you filed an invoice and you haven't been paid, let them know the payment is two-days past due. If that's not enough, keep following up. "The squeaky wheel gets the grease," says Benun.
There's only so much pestering you can do when a payment isn't being made. If the amount of money you're waiting on is significant enough that it's more important for you to be paid than to continue working with that client in the future, you can always take what Fishman calls the "nuclear option" and sue the client in small claims court. "It's a great way to collect a relatively small debt," says Fishman.
Still, before going that route, it might be more effective to simply have a lawyer write a letter to let the client know you're serious.
The key to keeping late payments from devastating your finances, says Benun, is having a solid marketing plan. "I need to know where I am according to my monthly income and what I need to do between now and then to make my goal," she says. "The way you do that is through marketing."
By marketing, she means having a regular plan in place to hustle up more work that you can turn to when your finances indicate you might be short. That could be as simple as committing to going to one networking event each month to help generate new leads, sending out a monthly newsletter to your contacts, or spending an hour each month making phone calls or emailing former clients about potential new work.
"There is definitely a feast or famine quality to freelance work," says Benun. "When people get stuck, they have no foundation to build on." Get that foundation in place, and you'll be in a much better position to take control of your finances—late payments or not.