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When it comes to getting paid, we run a pretty tight ship here at Web123, but it wasn’t always beer and skittles.
A few years ago our Debtors used to always be sitting at $120,000+ outstanding. It felt like we were just being used as a bank by a lot of clients and it sucked.
Some weeks we could barely pay wages having to beg on both knees for a temporary overdraft just to scrape by (on bloodied knees and all) to pay staff. It brings tears to my eyes just thinking about it.
Meanwhile there was all this money sitting there in our clients’ accounts when it rightfully should have been in ours. They kept promising to pay next week…next week…next week.
The stress and pain became unbearable. Heart beats. Palm sweats. Nauseousness, nervousness, neurosis. Sleepless nights. Why were we torturing ourselves like this? This isn’t fun. This isn’t what I set out to do when I started my business. What am I doing so wrong? What do all the ‘other’ successful businesses do? I just wanted to crawl into a thousand holes and never come out again.
So we decided to put our foot down and take charge.
Like you, we wanted to be in control – instead of being pulled by puppet strings each week. You do all the hard work – you deserved to be paid for it. And you deserve to be paid on time.
So we got strict! Not nasty, but STRICT.
These days, we’re barely owed any more than $20,000 on any given day.
Our clients now respect that if they do business with us, it’s on our terms. I can’t tell you how liberating it is for everyone — even our clients. (Because everyone needs boundaries!)
How did we do it? Simple.
And…who said systems aren’t sexy?
How we slashed outstanding debt by over 80% in 3 months
The first thing we did was introduce a ‘Cash Upfront’ policy. This goes for our website projects and also our hosting.
If the total project cost is $5,000 or less, it’s all upfront or we don’t start work. If it’s between $5,000-$10,000 it’s two part payments; over $10,000 it’s three payments and so on. Most of our website projects come in around $3-$5k so the majority is paid upfront.
Now pick your chin up off the floor my virtuoso friend and let me explain how we get this to fly with 40-50 new website clients per month…
We’re confident when we explain the next steps. We’re confident in our product. And we’re confident we’re going to deliver results in record time. We’re so confident in fact, we even offer a 100% money-back guarantee, which gives complete peace of mind to our beloved clients. (Have we ever had to give a refund? Yep, only once just yesterday!)
Confidence is easier said than done. It takes practice.
When a client gives us the green light, we explain our process and ask for a credit card to process full payment — we don’t give our clients any other alternative options to pay. Simple.
If they’re a government client or not for profit, they’ll request an invoice, which we do send for them, but we always ask for the credit card payment first and foremost as company policy. Sometimes we’ll even crack a joke and tell them we’re going shopping for the new company helicopter and ask if that’s okay…they have a giggle and happily hand over their details.
Just keep it light. 😉
We offer 1-month, 6-months or 12-months in advance. If clients opt for monthly payments, they need to supply a credit card to process payment automatically in advance on the 1st of every month. If they want to pay by bank transfer then they can’t pay monthly, they have to pay 6 or 12 months in advance. (We don’t offer discounts for 6 or 12 months either.)
It was a nightmare trying to reconcile hundreds of $49 payments each month so again, we just got STRICT. And we stand our dig too. Occasionally we still get clients who want to pay via PayPal, cheque or Bpay each month, but we politely explain why, go over our terms again in detail and stick to our guns.
What happens when web design clients don’t pay hosting?
I’m going to preface this by saying “I’m not evil” okay? I’m really not.
We were just sick of bankrolling clients and not being able to have the entrepreneurial success I’d fought tooth and nail to have. And you shouldn’t feel guilty for introducing this exact system into your design business either because that’s exactly what I want you to do when you finish reading this blog.
If a design client doesn’t pay on time and they repeatedly ignore our past-due invoice notices, we give them 3 warnings and then we deactivate their website. And we charge a $299 reactivation fee when they get their account back up to date.
There, I said it! Do you think less of me? I hope not. It’s not personal, it’s business.
Your time is simply too precious to be chasing clients for money they rightfully owe you. You slog away ‘til all hours, give their project your all, work to unrealistic deadlines with unrealistic requests and all for what? To twiddle your thumbs for 6 months until they feel it’s convenient to pay you? Not on my watch.
You need to command the respect you deserve and in my experience, this is the best way to do it.
Command on-time payments with these email templates
I share this sort of stuff all the time with my ProPartners but I really want you to also adopt a system for getting paid on time and feel the freedom, relief and control that comes with it — you have my permission to use these as your own.
Reminder #1 for overdue hosting:
This is just a friendly reminder that your payment for Invoice <Invoice Details> is now overdue. We realise sometimes these things are easy to forget, but if you could contact us as soon as possible to arrange a payment we would really appreciate it!
Please contact our Accounts Department on <Phone Number>, or alternatively you can email <[email protected]>
Reminder #2 for overdue hosting:
We are following up on our previous email sent on <Date of 1st Invoice> regarding <Invoice Details> which was due on <Invoice Due Date>. To get your account back within terms, could you please contact our Accounts Department to advise payment details immediately?
Please note that as per our Terms & Conditions, unpaid invoices may result in the deactivation of your website, which is then subject to a $299.00 re-activation fee.
If you have any queries with this invoice please let us know, you can reach us on <Phone Number> or email <[email protected]>
IMPORTANT NOTE: During the time between #2 and #3 we will have also made 3+ phone calls, and left messages, to see if everything is okay. Sometimes there’s a family illness, their business is going through a rough patch, or they might be overseas sunning it up in Hawaii and that’s okay.
I encourage you to always have empathy, but don’t get taken for a ride.
We’re always empathetic and often stretch these terms if we feel they’re being honest and upfront with us. We’ll try to work out a payment arrangement if they’re struggling, but if they just ignore our calls, messages and emails altogether and burying their head in the sand, after 21 days…we send this email:
Reminder #3 for overdue hosting:
This email is to advise that despite our previous contact on <Dates of Emails> and <Dates of Phone Calls>, the overdue Invoice <Invoice Details> is still outstanding and your account is outside our trading terms.
As a result, if contact is not made or payment details cannot be provided by 3.00pm tomorrow <Insert Date>, we have no choice but to temporarily deactivate your website, which will then incur a $299.00 re-activation fee.
Could you please contact our Accounts Department immediately on <Phone Number> to discuss payment options?
Nine times out of ten, we’ll get a call that day and payment will be sorted on the spot. On the odd chance we don’t, we do follow through and deactivate their website and we do enforce the $299 reactivation fee 99% of the time.
Some months we never get to this stage; other months we might have one or two clients we need to deactivate, but it’s rare.
But you know what? This very system was the only way we broke free.
When you control the situation, you can do anything.
Control = confidence.
Confidence = control.
So please, go forth and conquer your payment terms! Be brave. Believe in yourself. Be confident.
Implement this system into your business for your own sanity, success and most importantly — your freedom. It’s no fun being paralysed by fear and low self-confidence, struggling to make ends meet week to week on the smell of an oily rag; it’s time to make the jump from designer to…design entrepreneur.
It sure is sweet on the other side.
But before you run off to conquer entrepreneurial bliss, do you have any questions or comments on getting paid on time? Fire away in the comments section — I’m here for you.
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Bianca – I am quitting my day-job of 10 years and raising the bar by opening my own firm in just 7 short days. I came across this article and am so thankful I found it now rather than later.
As an experienced freelancer, the one thing I always struggled with was invoicing. With this system, it takes the stress out of trying to figure out how to come up with payment terms.
I’m so thankful for this and wanted to know what other policies beyond payment terms that your company implements that might help a small LLC get off the ground on the right foot.
Cheers from Des Moines!
Thank you for this!!!! I have been package design free-lancer for many years and over the last 3-4 years I have run across the an attitude, that I AM doing something wrong to ask for payment. WT_? Its very strange that they think its ok. One reason why I like to work for larger clients.
Thanks for this blog. Very helpful. I have a client that I’ve worked with for years and has always been difficult to work with. Very unorganized and I’ve ALWAYS had to chase them down to get paid. Recently I created two websites for them along with some other miscellaneous projects totaling $2,300. I’m a small one-man operation. I do not offer direct hosting so I set them up with a hosting co.
The invoice for $2,300 went out on June 14th. After several phone calls and one late fee, I got him to pay $800 of it on a credit card. He has since stopped answering his phone. I’ve taken one of the sites down and charged him another late fee but I feel like I’m out of options. I’ve considered just trying to run his credit card for the balance but without his permission to do so, I feel like that’s a bit unethical.
I would love to hear your thoughts and any advice you may have. Thank you so much for reading and your time!
That was brilliant! I have always adhered to this scenario until…a new client was talking about getting burned and didn’t want to pay all up front because of her experiences. Well, guess what? It bit me in the butt! The project scope [supposed to be small] that we began with, morphed into many more additional hours, as well as the client interfering with the technical process (authorize.net & outside hosting issues) & demanding multiple ‘reviews’. In a matter of 13 days she sent me 123 emails and kept me on the phone for 5.25 hours. Her last email saying it was taking long (6 business days) was the last straw. I emailed her that I had to drop her as the initial specifications were done & sent her an invoice for the balance due. She came back at me with 11 more emails threatening me as well as saying she expected me to finish and not pay for the additional tasks. LESSON LEARNED!!! Stick to your business model. Sob stories can be manipulation. Our work & time is worth every penny.
When a client refuses to pay me I send the account over to a commercial debt collection agency that has worked time and time again for me in the past! That is Tucker Albin & Associates… http://tuckeralbin.org
Did they continue to use you after that?
What about if client paid half upfront and doesn’t want to pay outstanding amount when website is ready to go and demands the website to be on his server and then he will pay? There is a risk of changing passwords so I don’t wanna do it. Then client is threatening me that I need to give the money back which he paid upfront!
I usually do my payment in two, 50% as a upfront and then the rest on completion (but it remains on my server until they have paid), I say the down payment is for starting the work, research etc, the time I put in for creating the designs (which I limit to 3 revisions) but in your case for the final payment its on your server, you don’t need to give them anything back unless they don’t like what you created however if they agreed to a revision then you should keep that as we don’t work for free 🙂
I always get them to agree to the design via email so I have a time and date and can always present this to them if I encountered a situation such as you have, however if they have agreed to your design, you have developed it and its ready to go then the client won’t get the website unless they pay the final part – so they will loose out.
First of all…great article and thanks for all the great info! Just a quick question. What would be a suggested wait time to consider before sending a “past due” email? Any help would be appreciated.
Its “nice” –ok, you got it– to see that it happens somewhere else.
I may have talked about this before, but to may shame, a lot of advice here, while truly valuable, it’s sometimes hard –not to say impossible– to apply here in Spain.
Government depts (city councils, regional/national administration and whatever other form of administrative offices ALWAYS, I say ALWAYS pay no less than 60 days, delaying some payments even ahead the 180 days point. For almost every project that runs up of 6000€ there’s always a process that includes:
– Being aware of the Official State Announcement
– Kowing where to find the info, always in legal jargon. It’s not rare to have a lawyer or leagl colleague to read it for you. A lot of normatives apply (company category (¿?), company financial assets, number of emplyees, a trusted declararion that secures you can do the work and a lot of other data unrelated to the project itself but to the legal status of your company).
-Realizing the amount of credit reserved for the project is usually waaay lower than the project needs. No joke, most of them are written by clerks or technicians without the help of true designers or consultants. I mean, it is THEY who put the price, not the agency or studio.
– If, for any reason, you still persist in pitching and succeed in filling the never ending forms and then got approval by the usual “kind and easy-going” functionary clerk, then you’re half-way there.
-Then, there’s the pitch (or contest). You have to work hard to make the best possible design project proposal in almost no time (since those announcements are usually made from just one to few weeks before they’re published) while knowing: some other studios are pitching (that’s ok, of course) but: it is written in the forms that the best valuable option will be ALWAYS the one with the lowest bid. No matter if the design solutions are bullshit. It is the first thing they value, and sometimes the only one. Not to mention, you don’t get nothing if you don’t get the project.
-The winning company has to put an amount of money as an assurance. It is usually quite high. If for any reason anything fails, they get this amount.
-Do the job
-Wait 180 days. Get paid.
I do not know if its like this in other countries, but I find this unbearable, no matter the place, to an extent that we rarely pitch for this kind of projects. We just attend direct calls for projects of lower profile but way more rewarding. I’d rather make a few books a year for a smaller figure than going for the big fish and die in the way.
Sorry for the long chat, and I’m deliberately missing the private companies side which I’ll keep it for another day.
Just had to say that. Anyone can share how its done there or there?
I am a very small-time freelance web designer. working for equally small clients. I have a slightly different way of dealing with late-paying clients.
My standard contract (never ever work without a contract!) has the following:
We all hate late payments, and I know you’ll do everything you can to pay on time. Things can happen, and I’m willing to work with you to change the payment schedule if you can’t pay on time. So let me know as soon as possible if you anticipate a payment problem. If you don’t let me know, I charge $200.00 a month as a late fee. I’ve never collected this, and I hope I never have to.
For the work I do, $200 a month is ridiculously high — but I’ve never collected it. I have had clients contact me that they need to pay late, but I’m fine as long as they let me know.
Your “Systems” link is broken. Great article, I’d love to check out what those systems are though. BTW what service do you use to charge a clients credit card and is there a service fee involved? Do you charge the client the service fee or do you take the hit?
My business is a bit different and I don’t charge a flat project rate for anything, it’s either a day rate or hourly. Should I ask for the upfront money on what I estimate it’d going to cost then? I’ve been asking for 25% up front, sometimes less. After reading this, I’m all about asking for the full estimate under $5,000 upfront. That sounds great for new clients, but how do I explain that to the established clients I already have. They pay slow, but I don’t want to lose them.
Hey Jerry, sorry about that, I’ll get that link sorted for you shortly.
We are in Australia so we use SecurePay as the payment gateway and NAB bank for the merchant facility. There’s also eWay or Stripe or even PayPal but SecurePay is our preference. There are fees involved but you should always shop around and negotiate the best rate. We currently pay less than 1%.
I’m not sure what type of clients you have but I would absolutely test the waters with new clients to get paid upfront for jobs under $5k. And if you explain to your clients that your terms are changing and why, 99% won’t leave you. It’s an invisible script that most of us in our minds but when you actually bite the bullet and do it, it’s like putting your rates up, you rarely lose any clients. And if you do, it’s normally the ones that weren’t ideal anyway. Maybe shift your existing clients to 50/50. Good luck!
The “Systems” link is back up. Sorry for the inconvenience!
Awesome post! I love reading your articles Bianca! My question is about getting the actual credit card number from clients – how do they react to that request? I’ve thought about doing that but with so much fraud, I would probably feel uneasy about handing my info over. How do you get your clients to be okay giving you sensitive info? Are you entering their info for payment as they provide it or do you keep it on file to process payments later? 🙂
Hey Tiana, great question and something that did take us a bit of practice to be honest. It all comes down to confidence. (And we normally crack a joke or two to lighten the subject too!) But in reality, it’s just confidence when we explain how we work. We don’t give them another option, credit card is it. Unless it’s a not for profit or government client and they pay by invoice.
We tell our clients to NEVER email or text us their credit card details and our CRM is linked into our payment gateway so we don’t actually ever store any card details on our system. It’s all secure and we can charge them again for recurring payments through our gateway but we can only ever see the last 3 digits on their card. If their card changes or expires, we have to collect the new details and enter that against their record. I would never recommend storing card details any other way, like in an Excel spreadsheet or something — it’s just too risky. Always use a secure payment gateway and payment method and you’ll be fine. 😉
On one had you say in this article that you collect money upfront and then on your website you give (100% money-back guarantee)? Plus you say don’t pay a single penny if you do not love what you see? It does not compute what message your giving away.
Hey Sean, I can see how that might be a tad confusing. Yes we do have a 100% money-back guarantee and our policy is that we refund clients 100% if they don’t absolutely fall in love with the design we do. Hence the ‘don’t pay a single penny if you don’t love what you see’.
In saying that, we’ve only ever had to refund one client just last week actually and that was because they completely changed the scope after they paid — not because of the design. We didn’t even actually get to the design stage.
It does go into detail on our money-back guarantee page and we’ve never had an issue but thank you for pointing that out. 😉
Once again, awesome article! Personally, I got really tired of chasing customers to get paid. What did I do to resolve it? I don’t release art files until payment is made. I’ll even explain to my customers that I’ve had to implement this policy because I’ve been burned too many times. I think that by explaining the reason, it reminds the customer that I’m human and everyone knows what it’s like to get burned so they’re understand. It’s a powerful thing to take control of this kind of situation!
Hey Jerome, great to see you again! This is a really great idea mate, well done!
Yeah, I think we assume a lot of the time what we ‘think’ our clients might think of us if we introduce certain policies but you’re right, when you explain why, they’re often more than understanding because they’re in small business too. They go through the same pains that we do. Power to the designers!
I just do 50% down and 50% upon satisfied completion. In my seven years as a designer specializing in identity design, I’ve never had a problem with not receiving payment. It’s when I didn’t require a down payment or when I did barter deals that I got stiffed. Bianca…2 questions for you:
1) Why do you choose credit card payments over Paypal and how do the fees differ?
2) I understand the importance of confidence, but how are you able to get government organizations to pay 100% of project costs up front? I find that most government organizations won’t even put 50% down (which is when I say, “sorry, I can’t help you then”.
If I may chime in…with governments whose departments aren’t allowed to put money down, often they can provide you with a voucher for the 50%, which you can redeem if you don’t get paid at the end. It may not be suitable for you, but it’s worked well with me to share the burden of trust.
Thanks for commenting!
That’s awesome news that you’ve never had to deal with not getting paid, hats off to you mate!
To answer your question about PayPal, I find them really difficult to deal with personally. They’ve withheld money from us in the past and make things difficult on a regular basis (I hear horror stories from clients all the time) and for the sums we put through each month, I don’t want to risk it.
Plus they’re a higher rate than what we were able to negotiate with our bank and payment gateway. I can’t remember exactly but I think they’re around 2% and we pay less than 1% so it’d be more than double.
And re: government clients, most of our gov’t clients do pay 50/50 like I mentioned but we always ask them first to pay 100% and about 25% do actually pay upfront in full. For the 75% who say no, we just raise an invoice for 50%. If you don’t ask you don’t get I guess. 😉
Encouraging post, Amanda. Thanks. Also really liked the nuts and bolts content you provided — the specific “how-to” of what you are recommending to cut down outstanding debt and to deal professionally with clients.
Question about your credit card policy: Aren’t you taking a big hit to your profit margin with credit card fees when you accept a 3-5K payment for a website project? Around 750-1250 if the credit card fee is at 2.5%?
Hey Scott. You make a good point re: credit card fees. We actually negotiated our fee to less than 1% so yes, we do pay a bit each month but it’s nothing like you’re suggesting. 1% of an average $5,000 website sale is $50 and I’d rather pay that and have the money in our account immediately than wait for weeks to get paid by account. 😉
Totally agree with your policy here! All the work should be respected and payed for. And web designers are no different – they can’t work for nothing, so it’s more than ok to take the payment before work, at least not to start before the first half is payed
Here here Victoria. Nailed it in one!
Agreed. In most other businesses, you have to pay first to then get the product or service, this one shouldn’t be so different. So many do what they can get a way with 🙂
You’re spot on Jay, that’s exactly what we thought. It’s just unusual for our industry to do it but why not swim against the stream I say!
It’s been a few years now since we’ve been doing it this way and we rarely have a problem. If a client has a real problem then they probably weren’t a fit to begin with and that’s totally okay.
Hey, this came right in time, I’m just in this position with a client, obviously not for those big amounts, but still chasing him to pay. What to do when he doesn’t answer email, phone call and all that stuff, also, how contracts work with oversea clients? … thanks for this post Bianca, came just in time.
Hey Barney, glad I could help. You might also want to check out this awesome post by David for what to do with they go missing in action like this, it’s great. http://www.graphicdesignblender.com/how-we-solved-almost-every-problem-a-freelancer-can-face
All the best!
I’m not even in the field of web design and I still love this post! Great read. I think everyone can incorporate confidence in their business. Thank you.
Why thank you for reading Jessica! You’re so right, confidence is the key so many things in business — sales especially!
Thanks for the templates! #needed those
My absolute pleasure! Enjoy to the max! 🙂
Thanks for the blog very interesting. I am in the process of having to enlist a debt collection agency and lawyer on a Powerpoint Presentation Agency that racked up 3 invoices in quick succession and I’ve not been paid a bean. The stress is incredible so anyone who can offer advice to othersto not get to this point is very welcome.
Oh Amanda, that’s terrible. I’m so sorry to hear that. We’ve got a client that’s not been paying us to and just sent it to the debt collector. He’s still refusing to pay so I’m not sure where you’re based, but in Australia, once the debt is over $5,000 you can take the matter to court. I think you can obviously do it for less than that but it makes it viable to pursue it at that amount.
Do you have in your terms that they don’t own the copyright of your work until the invoices are paid in full? If not, I would get that in your terms ASAP and like Jerome suggested, perhaps don’t release anything in future until invoices are paid in full.
We’ve only been burnt twice with not being paid in the last 10 years so luckily it is rare but it sucks when it happens. If you can’t get it out of them after quite some time and it’s costing you a lot of money and head space to chase it, sometimes it is best to just walk away and put it down to a lesson learnt (as hard as that is!) Good luck hun, I hope it works out soon.
I’ve been burned on copyright! I have solid contracts for everything, written by lawyers, and I still got burned. A client didn’t feel the logo was worth my bill even though he signed a contract, and engagement letter and gave positive acknowledgement of the initial invoice. He used this logo all over his website and had it printed on thousands of labels on products he was selling. I had a debt collector handle it and he still refused. Talked to a lawyer about the contract and copyright / intellectual property issue and he said it makes no difference unless I’m willing to pay to fight it and it would have cost me more. So copyright law is bullshit unless you have the money to protect yourself in court. Which is a huge bummer for us.
As I understand it (not a lawyer here), contracts only give you the upper hand in court. It still will cost you to enforce them, although you could add a clause in your contract that states that if you win, they pay for your legal fees.
Amanda. Don’t stress. You are doing the right thing. One of the reasons I use debt collectors is specifically to off-load the bad vibes that go with unpaid invoices. By calling in “the boys”, I’m doing something about it and can go back to serving customers knowing that the invoice will be paid (collectors are nothing if not persistent).
Hahaha! I think we must’ve done trial graphics work for the same lawyers :). Same here.
Sorry. Comments are closed.
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