Becoming a freelancer means leaving a traditional job in the hopes of feeling more respected, empowered, and excited to start each day. It also means taking on the task of running a business, from sales and marketing to accounting and paying taxes. Finances may be different every month, with a large payouts one month and then smaller or non-existent payments at other times. Budgeting is very important as well as getting paid on time. Unfortunately, most freelancers experience late paying clients or those who don't pay at all.
Here are the reasons freelancers don't get paid and what can be done about it.
The Cost of Nonpayment
In 2015, the Freelancers Union surveyed 5000 U.S. freelancers to determine the true cost of clients who aren't paying their invoices. They discovered that half of freelancers had trouble getting paid in 2014 and 71% had difficulty getting paid at some point in their careers. Most were paid late (81%) but many (34%) weren't paid at all. Other statistics included were:
- The average wait time for payment was 98 days
- 24% of freelancers surveyed were paid less than the agreed upon price
- 11% accepted less money in order to be paid on time
- 83% of freelancers had difficulty collecting from small businesses
- 36% had difficulty collecting from medium to large businesses
When freelancers aren't paid on time, their livelihood suffers. Freelancers will dip into their personal savings, use credit cards, pay their bills late or not at all, sell off their personal items, lose their homes or vehicles, or are forced to return to the workforce.
Why Aren't Freelancers Getting Paid on Time?
First of all, freelancers are not protected under any labor laws. New York City was the first to pass such a law, the Freelance Isn't Free Act, guaranteeing payment protection for freelancers after noting that 3/4 of the freelancers in New York faced payment difficulty. The only legal option for a freelancer outside of New York is suing for breach of contract. Sadly, not all freelancers sign contracts with their clients.
Here are other reasons for nonpayment:
- Red flags were ignored during the sales process and the client wasn't the right fit.
- The client has promised to pay but is experiencing cash flow problems themselves.
- The client is unhappy with the work and is withholding payment until the work meets their standards.
- The client has a history of using freelancers for work and then not paying them.
Because freelancers typically don't have the time or resources to hunt down payments, nor do they have much legal recourse, some businesses get away with this treatment.
9 Steps to Get Paid as a Freelancer
Getting paid as a freelancer means doing a little bit of homework up front. The work will pay off, literally, and be worth it.
Research your client - Do some research online to see if your client has stiffed other freelancers. In general, pay attention to see if the client is a good fit for your business.
Put limits on your work and time - When agreeing to do a job, be as specific as possible. How many revisions will you make before you begin to charge for your time? When is the project out of scope? Details will help the client know what they are getting so they don't ask for more.
Sign a Contract with your Client - Whenever you're agreeing to any job where there's payment involved, get it in writing and signed by both you and your client.
Set payment terms - Include payment terms in your contract as well as consequences for late or non-payment. Will you hold the work until payment? Discontinue services or charge a fee if paid late? State these clearly in the contract.
If possible, get paid up front - At least get a deposit, retainer fee, 1/2 payment up front, or some way to guarantee partial payment before you begin work.
Invoice regularly and promptly - Bill your clients regularly so they know when to expect your invoices and when you'll be expecting payment.
Remind clients that you're expecting payment - Use this sample collections letter template to casually remind your client that they're about to be or already are past due.
Make it easy for clients to pay - Research payment options that are convenient and easy for you and your client.
Don't play debt collector. Hire one. (For free). - If you've reminded your clients to pay and you still haven't received payment, you do have options. Before you consider small claims court, consider hiring a business-to-business collections agency. Some debt collections agencies (like us) don't charge a fee unless we collect on what's owed to your business.
As the American workforce continues to change, with incoming Millennials and Generation Z, and baby boomers retiring, legislation like labor laws will need to change too. Until that time, freelancers don't have to be victims of non-paying clients. There's too much at stake for those who've already given up the traditional job to work for themselves. Get organized, get it in writing, and get help getting paid.
