How to NOT get totally screwed as a freelancer

Whether you’re a 3D artist, a .net programmer, or a generalist web developer, you’ve probably entertained the thought of doing freelance work “on the side”.

The positives are numerous; the ability to make your own schedule, working mostly from home, and most importantly, the ability to name your price for your work. Yet, for all the benefits, there is at least 1 equivalent pitfall for that benefit, that goes along with being a pure freelancer. I’ll go over the most egregious ones below.

Non-paying client.

As a freelancer, nothing is worse than a client who doesn’t pay on time (or pay at all).

Pitfall #1: Non-payment
Man, nothing gets my knickers more in a bunch than doing freelance work and then not getting paid at completion. Not only is it a scumbag thing to do, but it’s also a great way to end up in court. At the beginning of my freelance career, I got caught off guard more times than I like to admit by clients who were late, or disappeared when payment was due. Luckily, as with any good freelancer, I learned from my mistakes.
Solutions:

  • Make Payment Terms CLEAR – Define rigidly the payment schedule. Whether you are taking a lump sum payment, or breaking up the payment schedule into milestones, be very clear about when payments are due, to the day. Any good project scope should be accompanied with a clear outline of when money is to be paid out. The first instance where money is NOT paid out on time, stop work immediately, and inform your client of late payment. Continuing to work is not going to be recognized as a good faith gesture, it’s just going to make you more irritated as you continue to pile up billable hours for which you are not being paid. Don’t do it. Make sure any late payment is documented in some way as well (sending e-mails occasionally about milestones, and their completion is a good way to keep communication documented).
  • Always take a deposit – This is something a lot of freelancers shy away from, because they believe it will make them seem greedy. No, that’s horse crap. It’s your only defense against lookie-loo clients. What are those you ask? “Lookie-loo” clients are the types of people who agree to a project outline, and even agree on payment terms, but say 1 week into the project, they may not like your personal design style, or they may not be as enthusiastic about the project, or are just trying to get you to do 1 weeks worth of web design for them so they can in essence get a “free preview” of what you can do, and will attempt to end the project prematurely if things aren’t going according to their own personal timeline. Ending a project relationship early is completely fine, from both sides. Sometimes you aren’t the right freelancer for the client, or the client is not the right one for the freelancer. Regardless, you should still be paid for the work you have done up until that point when they cancel the relationship. If you didn’t collect a deposit at the beginning, then you probably are SOL when it comes to collecting any money at all. My rule of thumb for collecting a deposit is usually 10% of a project’s total cost, or 50% of the first milestone payment. If a working relationship is discontinued, you return a pro-rated amount based on time (days or hours) that you worked on the project up until that point. In some cases, if enough days were worked on the project, you may be entitled to keep the entire deposit outright.
  • Outline penalties for late payment – On my invoices, I always have terms at the bottom that say when the invoice is due. I personally work on a net 21 system, meaning the total outstanding on the invoice is due 21 days after the project has been completed and delivered. If payment is late, I specify a 5% per week penalty meaning for every week the invoice is late, I add 5% from the original outstanding amount to the final invoice as a late charge. This gives the client a monetary incentive to be at least on time.
  • Outline benefits for early payment – Continuing the train of thought from above, I also give terms for early repayment in the form of a monetary discount. If an invoice is paid early, I will give up to a 2.5% discount on the entire invoice. I’ve found this is very effective on getting not only your outstanding invoice paid, but also getting it possibly paid weeks early.
  • The Courts – This is the proverbial last straw. If you’re at the point where you need to get legal counsel or involve the court system to get your money paid, leave no doubt, this is the worst possible outcome. Not only do you completely burn the relationship, but you now face the prospect of having to pay out more money just to get your original outstanding invoice paid. No client or freelancer wants to be here but that doesn’t mean you shouldn’t be prepared for it. Depending on the amount, small claims court may be a good option for you, especially to keep cost down since the cost of filing in small claims court is often far lower than retaining a lawyer. If you are at this point, make sure you have copies of all communication with your client, and all original project contracts and agreements ready to bring to court. Things like e-mails where the client is tacitly admitting they are late in payment but “will try to make good in a week” are very valuable evidence to help your case. Even if you win in small claims court, it still could be months until you see a single cent. For larger amounts (usually over $10,000), get a good lawyer, specifically someone who specializes in contract ligitation. In all likelihood, you will probably not get the full amount, and what you do get, a big chunk will be handed over to your lawyer. Just remember, it’s better than nothing.

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