Freelancing is undeniably the future of our economy; in fact, 47% of millennials already freelance
, either full-or part-time. And while freelancing comes with a lot of added freedom and flexibility, it also brings with it added risks, one of the most common of which is clients defaulting on bills. When clients fail to pay, as a freelancer, you can get stuck carrying the costs.
To protect your business, and yourself, you need to be strategic about managing client invoices. These three steps can help you get paid—or at least cut your losses when the money doesn't come through.
One reason freelancers get hit hard when clients don't pay is that they lack savvy billing practices, so take a moment to evaluate yours. Do you ask clients for a down payment on work or midway through the project? If not, it's time to start. By collecting payments from your clients at intervals
, you can prevent your business from taking a total loss.
Offload Your Invoices
Did you know that many businesses use their invoices to extend their funds? The process is known as invoice factoring, and you can do it too.
The primary benefit of invoice factoring is that it allows you to retain your assets while offloading default liability onto a buyer
. You'll make a little less using invoice factoring—you can usually sell invoices for about 75-95% of their value—but you don't have to chase down outstanding invoices.
And the buyer? They get the chance to turn a profit without any of the work. On large invoices, this can equal serious gains, but at least you won't waste your time chasing down money that may not come through in the end.
Don't Back Down
While there's always a place for that personal touch in business interactions, when clients won't pay, you need to be firm. The challenge: making demands doesn't always come naturally to women, who make up 53% of the full-time freelance workforce
. And even if you can hold the line, clients, particularly men, still may not respond.
When things reach the breaking point, and you haven't been paid, then you need to make your demands formal. Review your contract and send a clear letter stating what will happen next—in most cases, this will mean taking your client to small claims court
. Small claims court maximums vary by state, but you don't need a lawyer for such cases, which will save you money. Depending on the circumstances, you may also be able to send the bill to collections and let someone else chase your client.
As a freelancer, most of your clients will be great; they'll pay on time, communicate clearly and promptly, and express their gratitude for your hard work. Those few who give you a hard time, though, can make it hard to continue as a freelancer, and that's why you need to be proactive.
With an ironclad contract and established procedures for late payment, you'll hold the position of power in every exchange—and get paid at the end of the day.
Larry is an independent business consultant specializing in tech, social media trends, business, and entrepreneurship. Follow him on Twitter and LinkedIn.