Being An Independent Consultant Means Playing Two Roles: Freelancer and Bill Collector

from the you-gotta-fight dept

In one survey, 77% of freelancers said they'd had issues collecting payments from clients. Independent contractors can feel like they have to take on the second career of bill collector. The time it takes to collect on an overdue invoice can cost you dearly in productivity and the ability to finish other jobs effectively. What's an independent contractor to do when they are not covered by the same laws for wages as permanent employees are at businesses?

First and foremost, insist on a formal contract when possible. Having everything spelled out and agreed to in writing can make it easier to follow up on claims later. Also, make sure to include a clause describing a late payment penalty or fee schedule. Some freelancers have found success in offering a discount for early or lump sum payments. It'll depend on the client whether that will be attractive enough to get the check in the mail sooner rather than later.

Send out invoices on time. If there is a payment schedule spelled out in the contract, then follow that. If you are sending one invoice at the end of the project, send it in with the final product. Always include a due date on the invoice (you'd be surprised how many don't).

Once the payment is late, call the client -- call them the first day you realize it is late. The sooner you start the process, the faster you can hopefully resolve the problem. You should send a second invoice (with the revised amount if a late fee was agreed upon) and make another call to the client. Third, fourth, fifth, etc. invoices can be sent but your best bet to getting them paid is to talk with the client by phone (even better, in person). Be polite but firm and don't be embarrassed to ask for what's due to you. Patience, persistence and flexibility can go a long way in negotiating for payment. Another tactic, can be to write a letter to the client, your lawyer, their lawyer and/or any regulatory agency overseeing the client with an explanation of the situation and ways to remedy it short of going to court.

If the client still refuses to pay, there are always small claims court or collection agencies. But these should be absolute last resorts. You'll spend copious amounts of time gathering evidence, getting the client served, arguing your case, and the end result can be disappointing in small claims court. Collections agencies will take a significant portion of the money owed to you as payment for themselves if they collect.

As more people move to become independent contractors due to the struggling economy and difficulty in finding jobs, the problem of getting paid on time is sure to grow.

Filed Under: consultants, contractors