As a freelancer, or small business owner, it’s extremely important to get paid as soon as possible because more than likely you don’t have a Scrooge McDuck money bin to help you out. Money can be a tricky subject, and for one reason or another getting paid on time is something that will always crop up, no matter who you work with.
As a freelancer I’ve come across these obstacles myself and would like to share with you how I operate, and maybe you can share your own experience in return.
Communication is key
Right from the start, communication with your client is key to making sure everything runs smoothly.
- Make sure you have a contract (signed by both parties) with a breakdown of how much and when each payment is to be made.
- Always be up-front with pricing. Let your client know how much something will cost before you actually do it, even maintenance work for existing clients.
- If contracting on hourly/daily basis, keep track of what you worked on that day. You never know when you might need it as back up.
Always get a deposit
You haven’t got a sale until money has exchanged hands. Once money is exchanged, both parties will take the project more seriously, and are now devoted.
Being self-employed you’ll struggle to wait until to end of a project to get paid, as in the mean time you have bills to pay and a life to live. Getting paid in stages and asking for an up-front deposit should be no problem to any genuine client.
I will usually ask for either a 50% or a 33% up-front deposit, depending on the size of the project. If 33% then there will be a second payment due mid-way through the project.
Payment on receipt of invoice
Generally in the world of business, you will usually have 30 days to pay an invoice. Some businesses might even allow 90 days, depending on how much money is involved. But again, being self-employed, 30 days is a long time to wait for the money you’ve been working so hard for.
I ask for payment on receipt of invoice i.e. right away. And in my mind I hope to receive the money within 2 weeks. Of course that’s not always the case.
Send reminders
Even good clients will forget; they have other things to do, other bills to pay and like everyone they will forget.
If after 2 weeks you have not heard from them or have not received payment, send a friendly reminder. And be sure to re-attach the invoice for convenience. If after 3 weeks you have received nothing, send another reminder and perhaps follow up with a phone call. If it gets to over 1 month with no payment, this is when you start to worry.
Method of payment
Again, be sure to include your preferred method of payment in your contract so there are no surprises.
PayPal
The beauty of PayPal is that it’s handy, and it’s instant (unless sending an eCheck). Also, a lot of online invoicing systems already integrate with PayPal, again upping the handiness factor.
The problem with PayPal is that they take a cut. A cut of between 3.5% and 4%. So if you’re getting paid £1,000, it’ll cost you roughly £40 getting paid with PayPal.
I tend to use PayPal for smaller amounts from remote clients.
Cheque
The good thing about a cheque is it won’t cost you anything (except maybe 20p for lodging into a business account).
However, if you’re getting paid internationally this can cause a problem as it can take forever to lodge your money (even up to 60 days as I once learned after receiving a cheque in U.S. Dollars). You also have to wait that little bit longer for it to arrive in the post, and you have to make the extra effort to go down to your local bank (all this time adds up).
I usually accept cheques from local clients.
Bank transfer
For me bank transfer is the best method of payment. I pass on my bank details to a client and they do a transfer. Usually takes 1 or 2 days, depending on local/international transfer. If your client has online banking it should be handy for them to make the payment also.
A bank transfer will usually cost for both sending and receiving. The cost varies from bank to bank, and depends on local or international payments, although I’ve found it pretty reasonable (e.g. it will cost me £6 to receive a transfer from an American bank).
Bank transfer is the typical method I use for larger amounts from remote clients.
Accounting
When I first started freelancing, I setup a business account separate from my personal account. I find this a very useful way for organising and keeping track of money, as I don’t really think of the business account as ‘my’ money.
Whenever payment comes in, I transfer two thirds of that payment into my personal account (both accounts are at the same bank so this doesn’t cost anything). I keep one third in the business account to cover tax, national insurance and business expenses.
When things go wrong
If you’re unable to get paid, the last resort is some sort of legal action. Thankfully I am inexperienced in this area. To date I’ve been able to get paid with no major problems. If you work with good people and use the tips above, hopefully you can avoid this too.
I’m sure there are some people out there with horror stories so please share and let us know how you dealt with the problem.
Further reading
- 5 Essential document templates for freelance web designers
- 10+ ways to help you get paid
- Getting paid on time
How do you get paid?
Do you get paid in stages? How do you accept payment and how much does it cost? Ever not got paid? Share your tips and thoughts in the comments below.
Want to read more?
- 5 Essential Document Templates for Freelance Designers
- Designers, ask your client ‘why’ five times
- How to give and take feedback for web design projects
Psst! We're hiring an Interaction Designer at Kareo. Click here if interested.
Jordan Henderson says:
Fantastic post Lee. I’ve been messed about more than a few times with freelance, simply down to a lack of any formal contract. Good information.
Matt Daly says:
Nice post,
Might give the personal / business bank accounts idea a go. Sounds a lot easier!
Mark McCorkell says:
I wouldn’t even want to scare you with some of the stories I could tell you about projects that went sour that I’ve been involved in. None of these were a personal expense to me, but in a small agency and when a project is worth a good few grand it’s not good!
One recent project (inside the past month or so), which had been ongoing for several months previous… I designed an interface for an online electronics store. These guys believed they could rival amazon. These guys were determined to get this shop developed. They were advised that selling wouldn’t be easy, and that it’s not just as simple as throwing a shop up and watching the products fly out the door. Once I designed it, our Developer built it.
These guys refused to continue making payments for the work commissioned because they are convinced there is something wrong with the website, and that is why it’s not selling (ignoring everything they were told by us about the potential problems they may face in the global market place). *bang head off brick wall scenario! :-)
lewro says:
Really nice article Lee! Do you know any good sources where someone like me who is starting to freelance could fine legal document examples (invoices, contracts, etc.) Thanks a lot.
Silverbadger says:
Also watch out for the client who doesn’t pay the pence! £100.54 invoice. Cheque comes in at £100.00. Principal of the matter!
I use iBIZ as a timekeeper btw. Great app to back up the work you have done. 9 out of 10 clients can’t argue anymore.
Scott Millar says:
Excellent article. Going to benefit me and others starting pretty fresh into the industry. Cheers for the heads up!
Danny Turley says:
Great article Lee. I was able to take away a lot of great tips, especially with the Bank Transfer sounds like the best method.
It would be great to see how a template/layout of how a contract is drawn up between you and your client?
Lee says:
Thanks for the comments so far and examples of your own experience.
Should have mentioned this link also (now included): 5 essential document templates for freelance web designers http://www.leemunroe.com/freelance-document-templates/
Includes references and links to contract examples and invoicing tools.
David Radcliffe says:
Great article! Very true points – even though I’ve been doing this for a while its a good review. I’d like to echo Danny and say that a good follow up would be to outline a contract. Thanks!
Michael Kozakewich says:
Just so you know, your <html> element is black, which means it hides the black text on small screens when I scroll horizontally. It’s not shown under ordinary means, so you shouldn’t lose anything by making it white.
Robin Cannon says:
Nice post, issues that every freelancer faces.
I charge less as a deposit (25%), but you’re definitely right that a deposit is vital. Makes your client take your time seriously, and on a purely business basis also has a positive impact on cashflow.
I don’t ask for payment on receipt of invoice. I behave like any other business, with a 30 day billing period. That I’m a freelancer who might need the money is neither here nor there. I’ve found that often clients will pay quickly (or even immediately), particularly if it’s a smaller scale project for a new business (when they’re all excited).
Something you didn’t mention, which I’ve found works quite well, is including both early payment bonuses and late payment penalties. e.g. While I have a 30 day payment period, I sometimes offer 2% discount if paid within 7 days, or a 1% discount if paid in 14 days. The slight reduction in price is easily balanced by a quick and positive cashflow.
Martin Booth says:
Really good post Lee, I suppose honesty from the start when working will clients will help in the long run!
Great info!
Sean Delaney says:
Some nice tips there Lee!
I’ve only ever had one client not pay me until 2 months after the website went live, but by that time I had took the website down and put a message on the landing page for the domain. I had tried both ringing and emailing with no response…Phone always rang out! The client eventually sent me a cheque with a note telling me they didn’t know how to transfer money from a UK bank account into an Irish bank account… Lame excuse I know! I’ve refused to carry out any more work for the client since.
I ask for a 33% deposit up front with additional 33% payment at halfway and then the final payment when finished. This seems to work well for me and my finances. My last 6 clients have actually paid me the final payment 1-2 days before the project was finished which is always nice!
Robin Cannon:
Nice tip there mate! Offering a discount in-order to get the payment quicker is something I might look into!
Nikunj says:
Great article, nice to see topics on freelancing. Learned something out of it.
Tom Walters says:
Really nice post. I wouldn’t mind a post or two on setting up taxers and the like :) Also some of your grammar is incorrect – “I’ve came across these obstacles myself” should be “”I’ve come across these obstacles myself, just to be pedantic ;)
Liam J Moore says:
Great advice there Lee. I have to admit, getting a contract in place and a deposit are two things I’m sloppy with, yet they are probably two of the most impressive measures a freelancer could take. Gets the designer and client in a serious mode without one taking the mick out of the other.
Have to point out too, @Robin Cannon, great advice. A real incentive to getting paid by adopting an early bonus or late penalty scheme. I bet that gets clients eager to pay up asap!
Dan Lipert says:
Sweet post, very timely for me. One think I noticed when billing clients is that, at least in the USA it seems, ‘payment due on receipt of invoice’ means pay whenever you want, but if I say pay within 5 business days, then I tend to get paid more quickly. Five days seems like a long time, but it will fly by, and on the morning of day four, a friendly e-mail seems to help nudge along a forgetful client.
michelle says:
nice article, good article for freelancers
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Crystal Marie Mitchell says:
Great Post! I too have had my share of difficulty with a few clients. This has made me streamline my payment process and update my contracts. I do not wait the “standard” 30 days to get paid. Since this does not work for my business. I require a 50% deposit and payments upon delivery of milestones during the project.
natasha says:
very nice article…loved it
Alan says:
very good info for a freelancer
Peter says:
Another useful idea. Use your scanner to scan all business documents and receipts. When tax time come, send it all to your tax preparer. To do a collection, documents are dated for easy forensic descriptions to the judge. BTW, alway ask for a return receipt when sent to a client through email.
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Deni says:
very very good article bro!
John says:
Getting paid can be an asbolute minefield. Cashflow is king.
I think you raise some very good points.
Having a clear strategy will always help. If your sloppy with your invoicing then it’ll send a message to your client that late payment is acceptable.
Mark says:
Great article, very useful! Thanks for taking the time to put it together.
Apexfreelance says:
WOW! I like your post. Very informative and there are lots of good tips to be followed. As a Filipino Website Designer this help me a lot in my freelancing work.
As of my international client, after I have made the mock-up design, and before continuing the project, I’ll just let them pay for 30% or 50% depending of the amount of the said project. And the payment is thru paypal, xoom or western union.
And for my local project my downpayment is 30% and accept payment thru paypal, cash, bank to bank, cheque, xoom or western union.
Once again Thank you very much for yourinformative post.
By the way, I’m a filipino freelance web designer.
Jon says:
I’d be interested to see what other designers contracts look like these days. Everyone has their own, but I’m pretty sure everyone has the same basic principle.
George says:
Since a PayPal payment can be reversed, I give discounts for cash or cash equivalents such as bank transfer. I give this when the person is making a deposit.
You don’t mention receiving cash. That works too!
Blue Llama says:
Thanks for the info. As someone just starting off it isn’t really something I’ve considered – I suppose the employment world has protected me from bad debtors. Your post is a bit of a wake-up call. Not being paid for a big project would be really upsetting!
Cure-Halitosis.com says:
Hello, thank you for the info. I became self-employed about a year ago, and so for I never had to ask for money as I was not doing any freelance work. This month I started doing some Fiverr gigs and, from there, some people started asking me for other jobs. For really small jobs I think I will stick to Paypal for now. There is a fee, but if you compare it to using just Fiverr, it is a lot better (they take $1 for every $5, and then you also lose money from Paypal fees)…
Adam Daly says:
Good info. I’m still trying to figure out the best way to do this. If I figure it out I’ll let you know :).
artvisiona says:
Thank you, this post really helped me.I always use wire transfer but I thought that paypal is a more convenient way if everybody is using it.