For freelancers and small business owners, a late-paying client is a harmful and unnecessary burden. Financial issues are common in this line of work, and these businesses often rely on regular cash flow more than any other.
Working with clients who consistently miss payment deadlines can be frustrating, discouraging, and damaging to how they operate. There is more you can do to combat this issue than sending an email and hoping they get back to you though.
We’ve pulled together some proactive solutions to dealing with consistently late-paying clients to make sure your invoice is never missed again.
1. Contact the Client on the Day
If you’re a freelancer dealing with a late-paying client, you need to confront the problem head-on and avoid it building up. Yes, we know all you want to do when that payment doesn’t come through is throwing down your laptop and watch Friends for five hours out of frustration, but not tackling the issue makes it harder to deal with down the road.
Call up the client first thing on the scheduled payment day and ask when you can expect to receive the payment you are owed. People are more inclined to give a direct answer over the phone than by email, so even if you don’t enjoy it, it pays to pick up the phone. If they give you a new payment time later in the day make sure to give them a follow-up call just before the new deadline. Don’t give them a chance to feign ignorance, make them aware of the problem and explain why you should be a priority.
If they admit they won’t be paying you on your deadline day, make sure you have a new payment day agreed before you end the call. The worst thing you can do is let them kick the issue down the road. This way you have something to reference back to in future calls should the issue persist.
2. Use Online Tools and Automate the Process
It’s annoying to admit, but as a freelancer or small business, you need to do things the client’s way to achieve a stable working relationship. Thankfully technology has made it easier than ever to do so. Automating the payment process can make things much easier for the client and help eliminate a lot of the awkwardness that comes with confronting clients about late payments. This way you can avoid issues without any direct conflict.
Invoice services such as Wave automate the invoice process, allowing you to create professional invoices easily and send them out at set times every month. Investing in a system that creates recurring billing can ensure you’re paid on-time every month and relieve push back on the proposed payment date from the client. This won’t just be of benefit to you as a freelancer or small business, it suits the client by streamlining their processes and allows payments to happen in the background with a little manual work during those busy end of monthly periods.
At the most basic level a reminder app such as Remember the Milk can help you keep on top of the invoices you’re sending out and notify you of when payment from a particular client is due. As a freelancer or small business, there’s no one around to help you keep track of everything you need to do, so let technology lend you a hand.
There is a whole industry based around producing apps that help freelancers optimize their process, so use them to your advantage against troublesome clients.
3. Change Payment Model
By the same token, make things even easier for your clients by changing the way you get paid to suit their way of doing business.
How are you currently paid? Are you on retainer or paid by the project? Whichever one you’re using, if you’re suffering from late payments the grass may be greener on the other side. This will depend on the kind of work you do for them, but ask the client how they prefer to pay and if they’re happy with the current model. If you’re working on smaller projects for them, but consistently, it may turn out that they’re more open to the idea of paying you monthly rather than for each piece.
Clients are busy, they want things to be a simple as possible. The less manual a job is for a client the happier they’ll be to do it. A change in payment model can depend a lot on the strength of your relationship with the client and how much work you do for them, but it’s something worth trialling if late payments become a recurring issue.
4. Break up Payments
Sometimes there will be a legitimate reason as to why a client can’t pay, cash flow problems can hit businesses of any size. This doesn’t mean you should miss out too though, you have bills to pay after all. Offering to accept payment in split bills can be a proactive solution that benefits both parties.
Instead of charging a flat monthly fee, split your bill into two payments a month or possibly even weekly. This may be more manageable for small clients and encourage them to pay on a more consistent basis. A client may not have the money to pay for a larger invoice but could feel more comfortable pushing through smaller ones that are less effort to process. Using this method can make paying you, part of the client’s weekly routine.
Consider asking for an upfront payment with smaller, incremental additions throughout the rest of the month or leading up to the project deadline. This can build your trust in the client and give you enough to live comfortably on while you complete the work.
The key to this tip is its adaptability. Find a payment schedule that suits you and your client’s needs. Now even if someone misses a payment you’ll have a bit more to fall back on compared to if you were waiting for a full monthly bill.
5. Build Contacts in the Accounts Department
As any good freelancer knows, problems get solved faster by going straight to the source. Rather than calling the main desk and speaking to someone less informed, try and build a relationship with whoever is handling your payments in the client’s account department. This way you have someone involved in the process, you can get a straight answer out of next time you aren’t paid on time.
The easiest way for a company to sweep you under the rug is to act as if your invoice got lost in the shuffle or they didn’t know they were supposed to pay you. Building a rapport with someone in accounts will probably make them more likely to pay you first anyway. However, if they don’t, they won’t be able to ignore you when you call in.
6. Ask Them to Confirm Details
This is a sneaky little way of putting your relationship with the accounts department to good use.
When a client hasn’t paid on time, give them, or your contact in accounts, a call and ask them to confirm if they have the right bank details for you. This puts them in an awkward position of having to admit they do and that there hasn’t been a mistake, speeding up the process. If they legitimately don’t have your details it’s also a good way of getting them to them fast.
Putting a client in an awkward situation like this may seem a bit harsh at first, but it’s an effective way of getting noticed and, more importantly, paid.
7. Early Payment Incentives and Late Payment Penalties
This is a unique method that can appeal to larger clients and establish you as a serious business.
When you’re drawing up a contract with the client include a payment system with incentives for early payments and penalties for late ones.
This involves offering a small discount on your overall fee for clients who pay you before the set deadline date. You can also penalize clients who pay late by limiting the amount of work you’ll do for the next month or the remainder of the project. This is a useful tactic because it appeals to both a client’s desire to get a little bit extra for their money and exploits their fear of losing out on a collaborator who does good work for them and understands exactly what they need and how they operate.
While this might sound like a slightly out-there system for a small-time freelancer to implement, many remote workers and small businesses have found success with it. It can establish you in the client’s eyes as a serious business and show you’re not there to be taken advantage of.
8. Avoid Getting Angry
I know you’re tempted. This is the third month in a row they haven’t paid you on time and you’re about to call up that client and tell them exactly what you think. The problem is, you need to keep the cash coming in and to keep relationships positive. It’s not fair, but this is how it works and clients talk amongst themselves.
Whatever solution you choose to go with, make sure you don’t lose your temper. An essential part of working this way is keeping control of the situation. You are not the first freelancer or small business owner to be paid late, and there are lots of case studies to learn from. Unfortunately, this is a more common issue than you think.
A cordial relationship will make dealing with the issue easier and avoid conflict on future issues. Think of it as killing them with kindness. No matter what you attempt to do to improve their payment schedule, remember to remain polite and leave the door open for future working opportunities.
9. Stop Offering Services
An extreme measure for late payments, but one that gets the client’s attention. If you’re dealing with a client who has missed payment deadlines more often than not, fight your case and lay down the law by refusing to work with them until you are paid for what you’ve done and you have confirmation you’ll be paid on time next time.
Companies need to see you as a business and not someone that can be taken advantage of. Making this ultimatum puts them in a difficult situation that makes them realize just how important your work is.
A similar method is withholding the work you’ve done until you are paid. Whatever kind of project you’re working on, send over a short preview to let them know it’s done and includes an invoice. Explain that because of historically late payments you won’t be releasing the work until you are paid for it. This can upset clients, so use it as a last resort, but it helps to dangle the carrot in front of them to get payments completed on time.
10. Dump Them
If you’ve tried all these techniques to avoid late payments and you’re still getting nowhere with a late-paying client, it may be time to dump them. It’s not you, it’s them. You shouldn’t have to work with a business that takes advantage of your situation and makes it difficult to produce quality work. If they aren’t getting the hint, it’s time to find new clients.
Wrap up whatever project you’re doing for them and make a clear invoice for the remaining payment you’re owed. Ensure that you will receive it and part ways amicably. Once your contract is finished and the work is submitted there is nothing holding you to them as a business and you are free to find clients who will pay you on time. This can be frustrating if you enjoy the work or they’re an influential client to be associated with, but you must consider yourself first. You can’t work for free and need to find businesses that respect what you do and pay appropriately.
Life can be precarious for freelancers and small business owners, and a missed payment is a much bigger issue than it is for a larger company. You deserve to be paid on time. These methods will not only help you get paid, but help you stand up for yourself and establish your business as something to be taken seriously.