In my work with freelance professionals, I frequently see a strong focus on the creative side of business that takes a toll on administrative and management aspects. Of course, working for clients is the activity that generates income, but the long-term health of a small business also depends on managing finances and making continuous investment in upgrades. Frank, a copywriter and editor who was looking for help to make his freelance practice more productive, is a typical example. He doesn't fit the image of the starving artist, but sometimes has trouble paying his bills in spite of the many hours he works. "I am probably too nice," he says. When we put his accounts receivable into a system, he was surprised to see that his customers, with his permission, were dragging their feet on payments, essentially using him as a very convenient, interest-free bank. Here are a few effective ways to improve the cash flow of a small business:
- Communicate (and repeat) payment terms. Don't hesitate to clarify when a payment is expected. Spell out your payment terms at the time an order is placed, so there are no unpleasant surprises. Clients presumably budget the expense when they order your services, so there is no reason why you as a service provider would have to wait 30 or even 45 days for a relatively minor sum, while putting utility bills on your credit card.
- Get it in writing. Save any correspondence that makes reference to payment terms and price and be as specific as possible in your own offers. Larger businesses should have no problem issuing a detailed purchase order. Don't start the work, no matter how "urgent" it may be, until you receive written confirmation.
- Penalties. Clearly state in your invoices what will happen if the payment terms are exceeded. Here is an example from a utility bill: "Account is subject to a finance charge for late payment, computed at an annual percentage rate of 18.0% on total past due balance." Unless this type of language appears in your invoice, you won't be able to enforce any overdue balances.
You're not in business to do people favors. Your work speaks for itself, and so should your finances.
- Don't be lenient and assume that the client "forgot" or is "having a hard time." Send prompt reminders when accounts are overdue and follow up with superiors if you don't receive an appropriate response. There is no harm in being a "squeaky wheel" when it comes to timely payment. You already did the work, which makes your expectation to be paid AFTER the delivery appear quite reasonable.
- Send invoices as soon as possible. (How to do that if you hate invoicing). Including an invoice with a delivery is not "hard-nosed" or "demanding," but good business practice. You're not in business to do people favors. Your work speaks for itself, and so should your finances.
- Rank clients by the promptness of their payments so you can easily choose among competing offers. Quite simply, the better payers get first preference, and free work comes last.
Taking a firm stand on payment has nothing to do with providing prompt and high-quality service with a friendly attitude. It simply means demanding the respect your work deserves.