Getting Paid: How to Get Clients to Actually Put the Check in the Mail
One of the hardest things about being a solopreneur is chasing after clients who owe you money. It’s great to be nice when you’re out in public — holding doors open, letting a driver into your lane, and so forth — but if you’re too nice when it comes to dollars and cents, you’re doomed.
In a Utopian world, when you completed work for clients, they’d all pay you on time, and your business would flourish and grow. Unfortunately, that’s not the reality of how it often goes. According to a relatively recent Forbes article, small businesses struggle big-time with accounts receivable.
One survey found that one-third (33%) of small companies said they had more than $20,000 owed to them. The article also states that the average U.S. small business carries a whopping $53,399 in outstanding receivables. This is a tremendous amount for any small business or solopreneur.
Not getting paid is a big problem for small businesses because it seriously ties up their cash flow. As a solopreneur, this is not a problem you can afford to wait out, especially since you’re completely on your own without anything else to absorb your losses. If too many clients aren’t paying you (or even just one big client), you’ll need to take action or risk losing your business. Here are four ways to get your clients to actually put the check in the mail.
1. Ask for upfront payment
Before you start any work, always ask for payment upfront. This ensures you get paid for your hard work. For small jobs, ask for the full amount, and, for larger ones, collect a down payment.
You can either do this by collecting an amount equivalent to the first full month of work or by setting a percentage rate. Many solopreneurs opt for a 25% or 50% upfront payment before starting any work, although you may want to start on the lower end, say 15-25%.
You also can structure a contract specifying that the client will agree to pay in increments and, if a scheduled payment isn’t received, work will be halted until it is received. Whatever you do, try to be consistent to make for easier bookkeeping.
Asking for money upfront might be a little uncomfortable to do at first, but once you get the hang of it, it gets easier! This is a must-do, so you don’t lose your shirt after spending hours working, only to find out that big payment you were expecting isn’t going to arrive.
2. Send out friendly reminders
Don’t be shy about sending overdue clients a friendly reminder at the 30-day mark. It could be that they truly forgot inadvertently, or your check slipped through their own administrative cracks. Even if you give them the benefit of the doubt, be sure to always send prompt invoices. Don’t delay because most clients probably didn’t accidentally forget.
Also, if they continue to ignore you, you’ll have to get more aggressive in order to get paid. Start sending emails, calling, and snail mailing them. Not only does this show them you’re serious about collecting, but you’re also establishing a trail to show you’ve tried to collect. This will prove to be important in the event that you ultimately decide to turn to a collection agency or lawyer. (Be sure to research agency or attorney fees before pursuing this route; if the amount you’re owed is less, then the fees may put you deeper in the hole — another good reason to collect cash upfront for smaller jobs.)
3. Keep careful records
It’s inevitable that, at some point, a client will ask you about the details of what they’re being charged, even if you have a previous agreement set up. Always be prepared to defend your invoices if asked.
We get it: Keeping track of hours and accounting details is tedious, but it’s a must-do. Critical. Really. Critical. The good news is, there are several apps and software platforms (some are free or almost free!) that can help you to keep track of the less inspiring side of doing business.
4. Give yourself a bit of leverage
After the hard part of a project is done, and you hand over all your knowledge or creativity to a client, it’s a lot harder to get paid any balances that are due. You can avoid this by strategically holding back on a final piece of the proverbial puzzle until they make good on their promise to pay.
What you can keep as leverage will depend upon the type of business you’re in. As an example, say you’re writing an e-book or big report: Hold back that last chapter or section. Or, if you’re doing imaging, infographics, or other designs, don’t send high-quality prints — instead, or put a watermark on them so they’ll be useless to the client until you remove it.
Bottom line: Without the fully completed end result, a project is incomplete to a client, and it’ll be harder for them to finish it themselves. Let them know they’ll receive the final product in full (or at full quality) once they hold up their end of the agreement and pay their balance. Chances are, they’ll be less inclined to walk away if they see they won’t get the final product or if it puts them behind their own deadlines.Non-payment for work done is a real problem faced by solopreneurs and small businesses. According to the Better Business Bureau, 29% of small businesses fail because the owners run out of cash. By being proactive and diligent about the accounting side of your business, you can avoid disrupting your cash flow and keep your focus on the creative or technical side of your business.