Although I typically write about startups and small business ownership, I ran across a Quora question from a freelance web designer recently that I could certainly relate to: “How do I get paid? I’m constantly chasing invoices…”
If you’re a solopreneur, getting paid is a job, a job that you perhaps took unexpectedly. You’re not actually a designer or a developer or a copywriter. Those people work at companies with collections departments. You decided to be an entrepreneur instead, which means that just like me, you’re a small business owner.
The first thing you do to get paid is understand that collections is part of your job.
I have a lot of friends who are also entrepreneurs and do great work designing commercial lighting, building skyscrapers, and filming commercials. Many of them, however, never got over the shock of discovering not all businesses pay their bills. They’re still uncomfortable discussing money with clients and try to pretend the world is different and that people will eventually pay, all on their own.
They won’t. Here are a few ways we get paid at Dolphin Micro. Hopefully they help…
Money Up Front
A salty old real estate salesperson let me in on a secret called The Hooker Principle. It states that: “The perceived value of services declines sharply after services have been rendered.”
That leads to the corollary, “get the cash up front.” For small jobs, we collect the whole amount before we start. For large jobs, we collect a full month of work, up front, so by the time we send the first invoice, they’re not already 30 days behind.
We bill hourly and built Hours Tracking to keep a detailed account of what we do for clients. Clients ask us to defend our invoices from time to time and detailed records help immensely.
Ask For the Cash, Early and Often
The squeaky wheel gets the grease. Reminding them that they owe you money, with prompt invoices, and regular calls, letters, and emails when they’re overdue, gets most folks to pay.
As soon as there’s nothing left you have that the client wants, it’s much harder to get paid (see The Hooker Principle above).
- Don’t deliver the final designs until they deliver the final payment. Give them designs with your company logo on them as a watermark, or low res designs, until you’re paid in full.
- On long projects, where the client gets behind on payments, let them know you’ll stop work on a specific date (around a week in the future) unless you receive payment, and then follow through. Yes, it could cause them all sorts of problems on the business side with deadlines and such. That’s the point. Not getting paid is pretty uncomfortable too. Make getting paid their problem.
Formal Collection Procedures
If you’ve already delivered, have nothing else they want, and your requests for payment now fall on deaf ears, it might be time to escalate. Often just a letter from an attorney or collection agency will get you paid. If not, both can help you move your claim forward through formal legal processes. Collection agencies tend to work on commission (they get a big chunk of any money they finally collect) and your attorney tends to work on high, hourly rates. One or the other tends to fit depending on how much you’re owed.
Are you a solopreneur with dreams of launching a startup? I offer a weekly email series for entrepreneurs — sign up for it here.
This article is based on one of my Quora answers. If you dig it and want more, you can find me here. Also, if you found this article valuable, I’d appreciated it if you’d click on the recommend button below.