How to get clients to pay: Tactics for invoicing success

How to get clients to pay Tactics for invoicing success

One of my earliest clients was a fashion design company in Los Angeles who asked me to create a print ad for use in one of the larger industry trade magazines.

Excited to be creating a design with such a broad audience and with a nice amount of creative flexibility, not to mention a comfortable creative fee, I discussed goals and deadlines, created the ad, and sent the final artwork off to the client, all within their timeframe.

Having been careful to get all the necessary billing information, I sent my invoice off into the great void.

Actually, I sent it to the attention of the client’s accounts payable department.

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Do you know when my invoice was paid? Never!

Over the next 90 days or so, I sent emails, made phone calls and sent demand letters. I nagged. And… nothing. I never heard from the client again and was not able to track them down. They closed their doors and disappeared. But they used my work.

That was my first-ever experience with a non-paying client.

Over the years I’ve had probably a dozen or so clients who didn’t pay me, and that’s a small percentage of my overall client base. But what struck me is that my problem clients are the ones I learned from the most.

It’s because of those who never paid me that I tightened up on my business practices and created policies that govern how I work. I recognized what wasn’t working. I figured out from these lousy experiences that I needed to be as careful and consistent with how I run my business as I am with how I develop my creative projects.

In short, I learned to design my business.

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Non-Payment is a widespread problem in the Gig economy

According to Freelancers Union,nearly 50% of freelancers have been stiffed by clients. Freelancers reported spending an average of 36 hours chasing payments from clients who didn’t pay what they owed.

Talk to any freelancer who’s been doing it for a couple of years, and they’ll have a non-payment story to tell. It’s a bane of the freelance experience, and is right up there with the client who asks you to work for free. Even with a contracted relationship in place, there is no guarantee that a client will follow through as agreed.

What do you do when a client won’t pay you?

Sometimes the client can’t pay. Sometimes they refuse to pay. Sometimes they think they’ve paid but haven’t. No matter the reason, the freelancer is charged with taking time to collect or is out the money. This is a waste of time and effort.

A related issue is that a client will ask the freelancer to meet their short deadlines but then takes 30, 60, and 90 days or more to pay for the work. (Some large companies and government agencies are known for taking months to pay an invoice.)

So what do you do when a client operates on 90-day payment terms but you are obligated to pay your bills on a 30-day schedule?

Non-Payment impacts our work

Clients who don’t pay jeopardize my livelihood. They affect my ability to serve all of my clients to the best of my ability. They affect my ability to meet my obligations. They impact my family and my causes.

I like working with a safety net. I want to begin a job knowing that I’m going to be able to pay my bills and put food on my table right now while I’m working on it, and not after I complete it.

For me, and perhaps for you as well, the biggest issue with non-payment is that your time has been wasted, your creative work has been stolen, and you’ve been disrespected and devalued. For me, it’s necessary to set up for success before I begin a project.

You can avoid most non-payment issues simply by changing how you do business. I tweaked my business practices a number of years ago and since then have had little trouble getting clients to pay. I do certain things with every new project and every new client relationship that virtually guarantee I will be paid in full and on time. You can do these things, too.

I want to share some tactics to make getting paid more of a certainty. There are 2 overall approaches you can take: 1) Back-end — after the work is completed, and 2) Front-end — before the work is begun.

A few options for getting clients to pay

Use an automated software. Save yourself time and money by using the automated follow-up features in software like Bonsai, Freshbooks, or AND.CO.These services allow you to create invoices extremely quickly and send automatic reminder emails when your client forgets to pay.

You could also use email automation software like Drip or ConvertKit to send a pre-planned series of follow up emails, encouraging them to pay, hire you again, or give you a referral.

Factoring. Freelancers can invoice through factoring services and receive 70-90% of the invoice amount from the factor almost immediately. The factor then pursues the client for payment of the full invoice, taking a percentage as their commission. Factoring allows the freelancer to get cash on hand quickly, which keeps them in business.

It can be worth paying the factor’s fee in order to have money in the bank and not have the hassle of chasing payments.

A downside of invoice factoring is that the service usually requires handling of all the freelancer’s invoices. You sell them your receivables. If you decide to use invoice factoring, shop around and choose a factoring service wisely. Don’t become obligated to a service without vetting it.

Collection Agencies work with freelancers to follow up on unpaid invoices. These services charge a fee or percentage, and while not 100% successful, a good number of derelict clients will end up paying what they owe.

With collection services there may be a minimum invoice amount the service will accept. In my experience, it is the small-budget clients that are more prone to renege on their obligations. Collection services may not consider amounts of less than 4 figures.

Again, do your homework in choosing a collection service. Seek one that fits your business best.

Invoice Discounts. Another means used by freelancers is to offer a discount if the client pays within a specified number of days. The invoice shows the  full amount owed and includes a 5%-10% reduction for immediate payment (within 5 days, for example). Discounting is widely used and effective in many industries. But if a client is not going to pay, discounting has no effect.

Penalty Fees. Opposite of discounting, some freelancers (myself included) charge a late fee plus interest on past-due balances. This is less enforceable than front-end methods, but is effective with some clients.

In using these back-end methods you need to monitor and even automate your invoicing system. Keep track of when invoices are sent, when they’re due, when they’re paid, which ones are delinquent.

Most desktop and online accounting software have built-in features that do this for you. Whatever you use, always keep an eye on your invoicing system.

Front-End methods to ensure payment

Approach with the idea that you’re providing value and the client provides value in return. This creates an even exchange and equal footing.

If you come across to a client as unsure or needy, they will be more likely to take advantage of you. Here are the tactics I use to ensure that I do not work for free:

Terms. I include payment terms and other conditions in my contracts. My terms include, among other things:

– When invoices will be submitted and what forms of payment are accepted
– How expenses are reimbursed
– When usage rights transfer
– Who owns the working files
– What happens if the project is cancelled
– A description of the working relationship between me and the client
– By including detailed terms and conditions, the client knows what to expect and agrees to it.

Deposit payment. I require a deposit payment before I start working on the project. I do nothing until the deposit money is in my bank account. If the client is unwilling to pay the down payment or delays paying, I don’t start the job. It’s that simple.

With most clients I require a down payment of 1/3 of the total project fees. With some I require 50% down. In a few cases I require the full amount up front.

A very important side note on this: When you require the whole amount up front it’s a good idea to have a track record of faithfulness. The client is trusting you by investing their money.

Remember that some clients have been stiffed by freelancers in the past and are skittish. So you need to prove yourself if you’re going to use the pay-in-full-up-front tactic. This is also true when using retainer agreements,  which is a separate discussion.

How do you prove yourself? Through recommendations from other clients, by taking your client by the hand and walking them through your design process, by maintaining open communication with the client from the beginning, by listening and providing insight, and by sharing why you do what you do.

These actions create trust and connection, and help to assure the client that you know what you’re doing, have their best interests in mind, and are worth their investment.

Bill in stages. I use progressive billing. Invoicing at predetermined project milestones divides the creative fees into a series of smaller payments that are easier on the client’s cash flow.

Progressive billing provides a regular flow of revenue for you. You’re not cash-strapped while waiting for a big payment to come in.

How it works for me is that, after the down payment is received, I invoice at first review of concepts, and then again at final review. My final invoice includes any scope changes (for which I have written change orders), expenses, and any remaining unbilled creative fees.

When projects last several months, I invoice bi-weekly. Progressive billing ensures a steady stream of income over the life of the project.

The thing to remember with progressive billing is that you are paid up front and then do the work. Receive the deposit, begin the project. Work to the point that you have used up the deposit — I work to first review of concepts — and then stop there. Submit your second invoice, and so on. When you receive payment, resume working.

In this manner, you are never working without having been paid up front. If the client doesn’t pay, you just don’t do the work.

Provide estimates for expenses. I estimate all expenses and get written approval from the client before spending the money. In some cases I require the client to pay the expenses in advance, particularly when using online suppliers that require payment when the order is placed.

Accept credit cards. Another tactic you can use is credit card payments. Simply charge the client’s card whenever a payment is due.

But don’t do this without a written agreement or without submitting an invoice each time before you charge the card. The client needs to know in advance and agree that you’re going to charge their card. That way there are no surprises.

I include credit card payment options in my contracts. My practice is to send an invoice and let the client know I’m going to charge their credit card within 48 hours. Except for one time when the client’s credit card number was changed, I have not had difficulty being paid using this method.

If you have retainer agreements with clients and bill every month or couple of weeks, the credit card option is easy and can be automated. You can see up automatic payments on PayPal, Square or Stripe. If you use online accounting services (Freshbooks, for example), clients can pay your invoices with a credit card through the service.

Delay release of the work. Wait until you have received final payment before releasing any work to the client. This is easier to do in the case of digital files, but can be used when providing tangible goods such as printing. You do need to communicate in your contract that files are provided upon receipt of payment in full. I make it a practice to remind the client about file transfers when I send my final invoice.

Dont begin work without being sure. Do not do any work without first having a written contract signed by the client. That’s a written contract. You can’t enforce anything that’s not in writing.

No matter what size the job is, I require a written agreement signed by the client that we both can refer to. I can take this written agreement to arbitration or court if necessary.

Depending upon the client, the contract can be a long document outlining the scope and detailing the production schedule, itemizing deliverables and creative fees. Or it can be in the form of a simple work order with due dates and terms included.

None of the above involves taking legal action.

Enforce your business policies

Enforcement may sound heavy-handed, but it’s what you need to do. It does you no good to set a policy and not follow through with it.

Because I require signed agreements and down payments, I do not work with clients who refuse to pay a deposit, sign a contract, or who have reneged on a previous contract. It may seem unkind, but I don’t have to work with everybody, and neither do you.

You don’t owe your clients anything but what you have contracted to provide. I’ve learned that client relationships work better and last longer when a contract is in place and you stick to your policies.

Choose your clients carefully

One mistake freelancers make — especially early in their careers — is to accept every project and work with every client that comes along.

When I did that, I was stiffed more often than not. Clients went silent, changed their phone numbers, shorted payments, bounced checks, and post-dated and bounced checks! These problems went away because of consistent policies and written agreements.

Freelancing is a business

When you freelance, you’re in business. But you don’t have a business until you treat it like a business. If you don’t treat it like a business your clients won’t either.

My non-payment experiences taught me to do things differently. When I made changes to how I ran my business, it put me on a peer-to-peer basis with my clients. Instead of the top-bottom or head-heel relationship that I used to experience, clients took me seriously as a fellow businessperson.

Learn from my experience. If you don’t yet have business policies, put some in place right away. Decide what they will be — what works for you — and communicate them clearly when on-boarding new clients. Inform existing clients in writing when you add a new policy or make a change.

If you have policies in place already, be sure to follow through on them.

Maintaining good business practices will reduce — and can even prevent — the likelihood that you will not be paid for the work you perform.

What are your experiences with non-payment? What did you do? Share your stories in the comments.

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  1. That’s a very good overview, good job Alvalyn!

    I’d like to know how you handle late fees + interest. I only used them once, sending a cordial reply to a client informing them that as per the terms of our agreement, the invoice including a late payment charge… only to have the client become aggressive, and I never ended up seeing any of the money.

    A late payer is probably not the most upstanding one, and is already uncertain about paying you (for whatever reason). Tacking on a late fee, even if previously agreed upon, seems like the right thing to do, but doesn’t that strategy risk sending them further down the “yeah, I’m not gonna pay camp” and diminish the odds of ever recovering any money at all?

    1. Hi, Jean:

      Most of the time I don’t need to use the late fee and interest option. I’ve had just one client balk at it who’s been late. They ended up paying the original invoice amount without the late fee. I accepted that as paid in full, but let them know that they’d need to provide a down payment from then on.

      I’ve had far less problems with non-payment when I starting including the late fee and interest clauses in my contracts.

      Still, some clients simply have no intention of paying. Adding fees and interest for late payment will not help.

      That’s why I switched to a down payment system. If a client’s not going to pay me up front, they’re probably not going to pay when the work is finished. So I just don’t do the work if there’s no down payment.

  2. Hi Alvalyn, this is really what I needed right now. I’m having same issues in my business and even till now I have more than 5 clients who have not paid for their services and I’m tired. I recently put up some policies like the down payment option and it has pursued some of them away but I’m having I don’t have to work for free.

    It is annoying and can stress the life out of you. Thankfully I’m not married yet so the expenses are not that much but as you said, policies and enforcing them are very important.

    I am at the point where i have to enforce the policies everytime. Thanks a lot

    1. Doing work and not getting paid for it is definitely tiring. I think clients don’t realize the impact they have on a person when they don’t fulfill their obligations.

      I hope you’re able to find clients who are happy to pay for what they order, and better yet, pay up front. Keep enforcing your policies.

      Thanks for your comment.

  3. i have used collection services in the past, and while they are a “nuclear option” in my toolbox, it definitely works. my justification for using them even though they charge a percentage is that X-percent of my original invoice is better than zero percent of it.

    1. Thanks for your comment, Franko. While collection services are a last resort in most cases, they are effective. It’s better to get something rather than nothing.

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