Ask HN: As a freelancer, how do you ensure clients pay? What steps do you take to ensure clients pay you on time and what actions do you take when they don't? |
Ask HN: As a freelancer, how do you ensure clients pay? What steps do you take to ensure clients pay you on time and what actions do you take when they don't? |
Also, have complete Terms and conditions. One important point is all the intellectual property that goes with your work => until complete payment, the work is yours, and usage of it is illegal. With final payment, I usually issue a letter transferring the intellectual property to the client.
An other important point is all the payment and refund policy. My policy is simple : no refund, projects started are to be paid in full. If the clients needs an explanation for that, explain that while you dedicate yourself to his project, you have to say no to other projects.
Make it easy to get paid. Set up an online payment system or anything that makes the relation frictionless. Even if it cost you a bit, it makes payment way faster to arrive (no need to go to the bank or post office, find the checkbook...).
One saying I like : Until you sign the contract, you have to be the mum of your clients, reassuring him, explaining things, understanding him. Once signed, you are his father : you are here to reminds him the terms of the contract. It means that you have to be thorough on revisions, delivery dates for contents, and of course, payments.
Trust your guts with clients. Usually, in my experience, clients who are hard to get payments from are the one hard to handle from the start. Usually individuals pr small companies, who try to get more for less. And know also that you have the right to fire a client if you feel that things go bad.
But the best way to get paid : make outstanding work, be nice and understanding. Know when you have to charge for a request and when it can be free. Little treats are always nice if it cost you close to nothing and it has value for the client.
I love this one : http://vimeo.com/22053820
Funny analogy. I like it, however...
I've recently been skimming the book "Million Dollar Consulting". In there, the author says you should avoid the temptation to treat the client like a parent ("I'd better hide this problem, or the client will get mad!") or like a child ("I'd better hide this problem - the client is too helpless to deal with it themselves").
Instead, treat them like a partner ("we have a problem. What should we do?").
And, to answer the question what steps to do when they don't pay: not much you can do other than asking. There aren't any worthwhile legal resources for businesses or freelancers to be paid.
However, to not get there, make sure the payment schedule covers your work hours including profit and if they don't respect the schedule, stop working and mention there will be a delay in delivery. As he said, choosing well your client by avoiding people who are too difficult from the start usually avoids the worst kind of clients. As soon as your guts sees a red flag, don't ignore it and walk away. Your instinct is rarely wrong when sizing trustworthiness.
Due to the laws regarding unauthorized access to computer systems, it may not be legal for you to remove or even communicate with your software once it has been deployed to the client. For internal systems it might not even be physically possible.
To combat this, I like to incorporate a "dead man's switch". This means that the software will stop working within a certain amount of time (say 30 days), unless I actively intervene. The switch is only disabled once final payment has been received.
A notice somewhere on the site or in the app will say "Evaluation software - nn days remaining", so the client is aware and gets a countdown.
The switch doesn't have to be super sophisticated but it should incorporate some element of encryption - that way if the client attempts to circumvent it you can threaten them with a DMCA claim.
The ebook career.fork() that came out recently had more on this. Basically, you can learn to spot "clients from hell". There are certain traits that are the equivalent of pointy horns and a whiff of brimstone:
- excessive cheapness in initial negotiations
- "but we can just find a guy on odesk for $5/hour" (reply: OK, you do that, and come find me when it falls apart).
- no effort to understand technical issues. Of course, lots of good clients don't understand technical issues (that's why they hired you), but at least show some interest in what you're doing.
- unrealistic expectations (I want the next Facebook!)
- very vague ideas about what they want. "I need a website made!" Lots of good clients also have vague ideas, but its your job to help them figure out exactly what they need. Try sitting down with them with a pen and paper and listing what pages they need and an outline of the content for each one.
Now, some clients will happily sketch out Balsamiq type mockups, wheras others will just give you a brief list of the pages they need and let you work out the details. Both are fine. But if the client refuses this exercise, stay away.
My big surprise when freelancing was that most clients are not from hell. If you just avoid the jokers, there are plenty of good clients that value your work and pay on time.
Other tips:
- taking a deposit at the start is always good. It's like the client has "broken the seal" and will be more willing to pay in future.
- it's hard asking for payment. It's the social norm against asking for strangers for money. One advantage of paycheck employment is the only time you need to discuss money is in the interview. After the first few invoices, it gets easier.
- avoid getting desperate. When you only have one week's rent in your account, you might be tempted to take on a bad client. Easier said than done, but maintain a buffer of savings and start looking for gigs before your current one finishes.
- be a bit cynical. Even if the clients are the nicest, coolest people in the world, if your code is on their server and your money is in their account, it's quite easy for them not to pay you. If you control the code, and some of the money (ie, a deposit), you're in a much stronger position.
Yes, except skip the 'find me when ...' part.
(for levity) - http://www.youtube.com/watch?v=5hWIr9_noRo
Just as with other professional services (Law, Advertising, Accounting), I use a retainer model.
This works for me and filters out the clients who I feel value my work.
For example:
* $10000 put into an account that draws down against hours worked / daily / weekly output.
* Invoiced weekly through freshbooks
* As retainer moves below threshold in retainer it gets replenished.
Also, read up on patio11's posts here on HN. He's a smart guy and offers a lot of insights into what it is like to consult for a living.
When people owe you money it makes strange things to your brain. People may keep you hostage by withholding your money from you. You'll feel terrible. Best thing you can do is chalk up the ones that didn't pay as a cost of doing business and paid learning experience that tunes up your anti-asshole filter. My sanity immensely once I understood that sometimes you get screwed on your investments, it's impossible to avoid that in all cases and it's ok.
Similar to a pre-paid cell phone plans, ask your client to buy 10 hours (or 5, or 20) of your time, work those X hours, repeat.
This is the system I've been using myself for the last couple years, and I've never had to worry about getting paid. And I know I'm going to raise some eyebrows with this, but I've never had clients sign contracts either.
These describe the scope, schedule, cost, payment agreement, refund policy, etc.
http://en.wikipedia.org/wiki/Work_breakdown_structure
http://en.wikipedia.org/wiki/Statement_of_work
When we reach a milestone, we invoice the client for the amount we agreed to in the statement of work.
With my new startup matchist (http://matchist.com), we're actually tackling both these problems (finding the clients that will actually pay on time, every time, and guaranteeing that they will). We vet all clients and escrow payment so that you know you will actually get paid when work is complete.
1. I only work with clients that I trust. How do I find out if I can trust them? Extensive interview process. Is their business sustainable? Have they worked with freelancers before? Do they have references for me?
2. I have clients pay me up front. No, seriously. I have a contract that lists my rate and asks for the money up front. If they want different payment terms, we can negotiate from there (and usually to a point that we're both happy with).
3. I don't let myself get 'underwater' with a client. I use Harvest to monitor the time I spend working on client projects. It sends me a notification when I get within (80%) of the time allotted on the contract. I have a text expander snippet that I fire off to the client with something like 'Hey, we're at 80% of the time you've paid for on the project' and let them know if I think we'll need more time or need to reduce the scope.
4. I attempt to collect in this order:
(a) Phone call to the company [the person I'm working with on their side] confirming they received my invoice (10 days after due) (b) Phone call to the person who signed my contract confirming they received my invoice (15-20 days) (c) Repeat phone call to the person who signed my contract (30-40 days) (d) Letter from my attorney
How often have I had to use these? Once. Why so infrequently? Because I follow points 1, 2, and 3 with new clients.
Make sure there's a late fee, and enforce it! You will almost certainly find clients that don't pay on time, and letting them essentially get away with it will only make it worse.
The one measure I've found that puts honest but lazy clients on the ball, though, is stopping work as soon as payment is overdue and not continuing until they're current (including the late fee).
We are primarily a service business that also sells hardware and software, and we design custom databases. The software almost always has "pay as we go" milestones in the contract. This keeps us funded and forces checking in with the client at logical points to make sure the design is going the right direction.
All of our invoices show Due on Receipt, we grant 30 days, then either a cheerful reminder, or a late fee and reminder.
Too many late invoices (three - we are rather forgiving) with no communication ahead of time gets the client dropped.
On the service/sales side:
With new clients or large orders, we ask for deposits or retainers.
We also offer reduced rates of blocks of hours if paid in advance (can help with starting cash flow).
As an aside, we use referral fees paid to people who refer clients to us. Arbitrarily I arrived at 30% of first hour and %50 of second hour (None beyond that) charged to the new client is paid to the referrer (Service work only).
First, it gets us more referrals for work, and second we get to take advantage of the reputational value of the reference - Few people want to flake on their invoices if it is going to make it back to the referrer.
YMMV.
If you suspect that client might be opposed to paying all of the money up front double the price and take 50% up front. You can give discount afterwards if everything goes well. I noticed it improves relations with the client.
If your project is large and can be split into stages then do that and take all the money for each stage before starting it.
Since I check in my code, static files, documentation, and all resources along with the weekly invoice, the payment is due immediately. The client is aware of my progress on a weekly basis and knows exactly how many hours I have spent on which feature. I've worked like this for over a dozen clients and not one of them has ever had a problem with it.
I do not work on fixed-cost contracts but rather fixed hourly rate contracts. I give detailed estimate (Statement of Work) before the contract is signed and if I go over the estimated hours for any task through no fault of the client, I eat the overage costs (teaches me to quote better). If I am under the estimate, I bill exactly for what I worked on.
Usually if they don't pay right away I explain to them that I need them to always pay within a day or two. If they forget to pay after that, one extra email or IM is usually enough.
You might have to actually call them.
I also tend to not work on a project between the time that an invoice goes out and when it is paid.
From my experience once they are actually aware of the bill they usually pay within 0-3 days. If it takes longer than that, maybe you can get better clients.
2. Get a deposit (ideally one month's pay) up front. If your client doesn't want to put down a deposit, find another client
3. If client doesn't pay you for more than a month, ALL WORK STOPS until you have their money in your bank account.
Problem solved. If your clients are in town and aren't paying, feel free to drop by their office and remind them that you aren't working until you get paid. An in-person reminder is a lot more influential than a piece of paper with a number on it.
Same here , if they aren't willing to pay a % up front , the discussion ends there. Move on to the next client.
In general, I think that being nice to people, having fair billing practices, and doing good work are the best ways to make sure your clients pay on time. As well, when I'm preparing an invoice, I like to email a client and say that I'm preparing an invoice...I usually do net 30 but I wanted to know if there was anything I could do to make things more convenient.