How to prevent late payments and get paid on time (every time)

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“How do I handle a client who repeatedly pays late?”

I get this question from a lot of the freelancers I work with. Chasing after payment is a huge time and energy suck that almost all freelancers experience at one time or another.

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The problem with this situation is that dealing with it after it has happened is less effective than preventing or minimizing the chance of it happening in the first place.

How to avoid late payments

Minimizing or avoiding late payments is all about making it easy for your client to pay you.

When freelancers ask me how to deal with late payments, the first thing I ask them is if they are making it easy for their client to pay them.

Here’s how to do that:

Accept payment via credit card

A lot of freelancers get caught up in the fact that they are giving away 3% to credit card fees.

But seriously, that’s the cost of doing business.

Instead of looking at it as a loss, think of all the time you’ll be saving by knowing that you’ve been paid and not having to chase down your client, or wait for the check to arrive in the mail.

Sidenote: Once you finish, read how 4 freelancers built recurring revenue models that changed their business. You'll love it.

If the 3% really bugs you, just raise your prices a bit to accommodate it.

Whatever you do, don’t try to charge your client the fee after the fact. It comes off as petty, makes your client feel nickel and dimed, and in many cases can be illegal.

Set payment terms

When a client signs on to a project with me, I send a Welcome Guide that includes my terms of service and how they will be billed for any upcoming work.

For example, I state in the document that all invoices are to be paid on receipt. This sets the expectations ahead of time, so they are not surprised when they receive the invoice with net 0 terms.

This also allows them a chance to voice any issues with the terms before there is a problem.

Be firm

Tell them that work will be paused on any overdue invoices until payment is made.

It is up to you whether you honor this or not, but again when you set the expectation ahead of time, it helps prevent a late payment from happening.

I also set up a late payment reminder in my invoicing software (I use Freshbooks) to send out a late payment reminder when the invoice is overdue. I send the first reminder three days after payment is late, the second reminder seven days after payment is overdue and a third reminder 15 days after payment is due.

The nice thing about the automated emails is that it comes from my invoicing software so if feels a bit less personal than if it were sent directly from me.

It lets me avoid having that difficult conversation that we all dread having with clients and is really effective at “bugging” them until they pay.

Get a project start fee up front

At the very least, before starting any project work get 50% upfront. This is the bare minimum to start.

Even larger companies with very stringent payment policies (Net 30 or Net 60) seem to always find a way to cut you a check to get the project started. (I like to call it a “project start fee” rather than use language like “deposit” to dispel any notion that it’s a refundable fee.)

Offer a discount to get paid in full upfront

For a long time now I’ve offered a 10% discount for full payment upfront. Many of my clients take me up on this offer.

You might balk at giving away a chunk of the project fee, but to me, I get the peace of mind that I’ll never have to chase after a client for payment.

It also boosts my cashflow which allows me to invest elsewhere in my business if needed.

Decouple deliverables from payment

When you tie payment to milestones, there is always the possibility that a client will lag on the approval and your payment will get pushed further out on the timeline.

One way around this is to state that you will be paid upon approval of the milestone OR on X date. Whichever comes first.

So if you have a project where you get 50% upfront to start, the second payment (25%) might be on completion of a milestone OR on X date. Then the remaining payment is upon completion of the remaining milestone OR on X date.

That way you get paid even if the client takes forever to give approval or is behind on getting you content for the website you are helping them build.

Knowing exactly when you are going to get paid will make you sleep better at night.

Get creative with your terms

The flip side of offering a discount is offering a payment plan.

Sometimes I’ll offer the client the choice of a discount for payment upfront, or a payment plan where all the payments are broken equally over six months (or twelve months for longer projects). This option comes with an added mark up to the overall project (15-20%) for taking on the added risk of the client not paying you at some point.

The nice thing about offering a payment plan or a discount for full payment is it gives the client options on how they want to pay, involves them in the process, and makes them feel like they have a bit more control.

Should I charge a fee for late payment?

I hear this question a lot. Personally, I don’t like charging a late fee.

I might think of including it in the terms as a deterrent, but charging a small fee for a being late can do more harm to the business relationship than it’s worth and still might not sway the client to pay up.

Instead, I rather do all the work upfront to set expectations and make it easy for my client to pay me.

If you are still having issues, you might look to cut that client loose if you can afford to, but as with most things, prevention is the best solution.

The best way to avoid late fees is to never let them be late in the first place.

What techniques do you use to get your clients to pay on time? Let me know in the comments.

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About Ian Vadas

Ian Vadas is a designer and the author of Work With Clients You Love. Get the eBook to learn how to select clients that pay well, treat you with respect and allow you to do your best work.

For tips on getting paid and maximising your freelance revenue, join the FREE email course Pricing For Freelancers.

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Comments

  1. Hi sir Ian Vadas

    Good day, this is an awesome article it’s a big help for me as a freelance graphic designer.I want to ask something if you have some tips in making some Invoice templates? and also can I ask your email address for some tips and clarifications for this article. Thank you and have a nice day

  2. I loved this article and I have had this problem! From now on I will charge a project fee instead of a non refundable deposit I love that term you use and Thanks again for taking the time to write this!!!