For any business, big or small, sending out an invoice should be a delightful experience—the crowning culmination of all the hard work that generated a slew of billable hours resulting in said invoice, the glorious banana treat the end of a long day’s, week’s, or month’s labor. Sadly, invoicing—especially for smaller businesses, independent contractors, and freelancers—can often be quite the opposite of a pleasant experience.

The Stress of Getting Paid

So you’ve burnt the candle at both ends, your monkey tail is dragging, and all you want to do is a bit of admin work totaling up your time, generating an invoice, and emailing/mailing it to your client. The work has been delivered, the client is happy, and you’ve got bills and/or employees of your own to pay. The last thing you want (or need) is to spend hours, if not days or weeks or more, hounding late- or non-payers to paying you.

But it happens, sometimes far too frequently.

If you’re a big business and a few customers fail to pay you in a timely manner, chances are you can weather the storm—plus you probably have an in-house team that can track down the non-payers, work out payment plans, and get some cash coming in. But if you’re a small business, delays in getting monies you’re owed can cause all sorts of hardship.

Freelancers, such as writers, designers, programmers, and IT consultants, typically don’t have steady cash flow due to the cyclical nature of their work. Some months are good, some are really good, and some not so good—and slow payers make it difficult for them to keep up with their own commitments (aka bills). Throw in the fact that they feel somewhat at the mercy of their clients’ willingness and ability to pay, it’s no wonder many small businesses and independents are reticent to make too much of a stink. After all, slow payers are better than having no customers at all. And yet . . .

What Can You Do?

For Your Current Customers

Once the proverbial horse has left the barn—in this case, once one of your current clients is late in paying—your options are fairly limited. You’re not likely to engage legal action unless the sum owed is substantial; you probably don’t have a billing team that can act as your in-house collection agency, nor are you likely to spend hours and hours calling, emailing, or sending letters to the client demanding payment. What I’ve found to be most effective, provided the client is legit and not a scam artist, is open and honest communication between you and them about the non-payment.

  • Explain that as a small business, you can’t afford to go without payment, that in order to stay viable for the client and for others you need to be paid for services rendered in a timely manner.
  • Offer to set up a payment plan. A little bit of money on a regular basis is better than none for long periods of time.
  • While you don’t want to threaten to withhold your services, explain to the client that you will need to give priority to those clients who do pay in a timely manner.
  • At some point, you will need to do a bit of soul searching, asking yourself “Is this customer worth the hassle of chasing down payment all the time and the stress that goes along with that?” Only you can answer that question. But just know that severing ties, likely means you will be out the money owed.

For Your New Customers

When a new customer engages your business, you can do them—and yourself—a lot of good by properly setting expectations up front about your payment policies.

  • In consulting, it’s customary to ask for a partial payment up front, before work begins, ranging from 25% to 33% to 50% of the anticipated fee. This gives the client more immediate skin in the game, commits them to working on the project (since they’ve already outlaid some money) and gives your business some working cash.
  • Explain to new customers that you assess a late payment fee, based on a percentage of monies owed, for any balances over 30-days old. This will prompt many to pay on time. Of course, if you fail to impose the fee, customers may come to regard the fee as a hollow threat—so be consistent. If you say you’ll charge a fee, charge a fee.
  • Do due diligence. It’s likely the client vetted you before engaging you to work for them. Likewise, it’s not unrealistic for you to ask for references from them so you can evaluate their fit as a potential “excellent client” for you.
  • Establish a preferred client rate for your products or services. Spell out to new clients what criteria the client needs to meet in order to get the preferred rate, one of which, of course, should be the “timeliness of payments.”

I Gotsta Get Paid by ZZ Top

The Bottom Line

Despite best efforts, if a customer or client is determined not to pay, for whatever reason, he or she can likely find a way to achieve that goal—unless you’re willing to go to court or collections. Most small businesses and freelancers simply don’t have the time or resources to engage in that kind of protracted dispute. If you find yourself in such a situation, sometimes it’s best to cut your losses and consider the experience a “lesson learned.” Then, introduce some of the strategies for working with newcomers to lessen your risk of not getting paid going forward. Chances are it will pay off big time—quite literally!