It’s an ultimatum and memorable phrase in cinematic history – “Show Me the Money!” A hot-shot football rookie pleads with his sports agent Jerry Maguire in the movie of the same name to “Show Me the Money!” “Show Me the Money!” It’s powerful, yet comical in this instance.
But it’s real and nasty in another. It describes a real-life predicament that many people face in trying to collect fees for the services they rendered. Freelancers, in particular, are subject to this irksome issue of nonpayment. And in today’s gig economy, “Show Me the Money!” is indeed highly prevalent and perilous.
How common is this threat to financial well-being? Ask freelancers to identify their biggest challenges. Expect to hear not getting paid repeatedly and prominently. This grievance comes in at number six in “25 solutions to problems only freelancers face.” This post acknowledges that not getting paid is “going to happen eventually. A client is going to cut bait and run after you’ve delivered the work.” This concern clocks in even higher, at number four, in “The unglamorous side of freelancing.” This writer notes: “Doing your work on time and sending an invoice on time doesn’t guarantee being paid on time. Most freelancers have experienced clients who are late at paying – or worse, clients who won’t pay at all.”
In the bigger picture, it’s not only freelancers who contend with this frustrating matter. The clients that engage them may wrestle with it too. You would think, since these businesses that use freelancers depend on collecting fees for their own products and services, they would understand the importance of paying and not taking advantage of the freelancers who serve them. Sadly, that is not the case… not for all, but some.
Down with Deadbeat Clients!
Life being what it is, an oversight in payment may occur. OK, that may (but shouldn’t) happen. Nonetheless, with a simple past due or second invoice, the situation can and may be rectified. Late payment also may arise because of cash flow problems. Again, a reminder and phone chat may pave the way for settling the matter equitably. But then there’s the BIG one – the client that fails to respond, dodges all calls and contacts, ghosts the freelancer. Multiple attempts to confront the issue aren’t working. The client is incommunicado. The money is not coming. Getting stiffed is infuriating and violating.
What can freelancers do to guard against not getting paid? If – and when it occurs – what options are available to deal with deadbeat clients?
- Search before securing new business
Reeling in a client is exciting. It’s a new block to build a business. In planning and conducting exploratory meetings, place your objective judgment front and center. Don’t wear blinders. Working with a new entity – and even an existing one – has its risks. It’s not enough to come away with a merging on the minds on goals, workflow, and approaches. You need to determine: Is this client trustworthy? Clients assess freelancers’ work and character. Do the same. Ask questions. Gather supplementary information. Review the client’s website. Research the business and the person. Run a credit check. Don’t get carried away with dreams of a potential infusion of cash. If you’re not cautious and conscientious, you may never collect it. If something seems suspicious, walk away.
- Stay close and familiar, if possible
How do you land clients? Going the route of local or connected sourcing may remove some uncertainty and unknowns. Personal referrals fall into this category. Getting clients through word of mouth is another potentially lower risk avenue. Let friends and family know you seek new, reliable clients. Similarly, go prospecting at community and religious groups, civic and social clubs, where there may be some ties that bind. The same goes for professional organizations and alumni associations. Common threads may cut down on the chances of acquiring a rogue client. But it’s not fail safe and may not be productive enough to grow a business. Thus, even when pursuing this path of presumably least resistance, it’s critical to vet clients carefully.
- Put everything in writing – no exceptions
A verbal agreement, nod, and handshake are nice. But they are signals and only a start. Freelancers are in business and must conduct negotiations that way. Hash out billing rates, payment terms, contingencies, and out-of-pocket expenses. Then set it all out in a formal letter of agreement or contract – signed, sealed, and delivered. Retain copies and refer to them, as necessary. If you don’t have these boilerplate forms at the ready, research and retrieve them. Ask other freelancers and business owners for samples of theirs. Search the internet for templates. Discuss upfront with an accountant, mentor, lawyer, or legal service. For each new project, write detailed descriptions with timelines and cost estimates. Have the client review all provisions and sign.
- Arrange remuneration in increments
Welcome to the concept of divide and conquer applied to the payment space. Set up incremental schedules to cut down on getting stiffed. For example, collect a down payment for work to commence. Then bill for the balance upon successful completion of the project. Getting paid in thirds with specific milestones and dates is another way to go. Here again, a down payment initiates the work. An interim payment occurs when a meeting takes place to review progress to date. The final payment signifies acceptance of the project. Regardless of the payment scheme – one or multiple – include detailed information about terms. Is it on receipt of deliverables, NET 30 or other? And address delinquency by spelling out late fees with set dates and penalties.
- Be your own H&R Block
Keep detailed financial records and track your receipts or lack thereof diligently. The premise here is to act swiftly to try to rout out a problem and stop the hemorrhaging with a client as early as possible. By being on top of the situation and taking timely action, the outcome may be more propitious. In other words, take a cue from the expression “the sooner the better,” which tends to work in your favor. Bring up the issue of late or nonpayment shortly after a client misses a targeted payment date. Discuss the situation upfront to determine the cause, extent, and when you can expect to receive funds. Contact Accounting or the Accounts Payable group, if the client has one. Don’t be apologetic. Don’t stop pursuing. Your livelihood is at stake.
- Fight the fight freelance freestyle
Battle up! Sometimes, repeated invoices, emails, and communications don’t bear fruit. It’s time to escalate. Consider Freelancers Union as resource in this instance. Bonus: it’s free to join. As the group states: “Freelancers Union has been advocating on independent workers’ behalf since 1995, giving our members access to education, resources, community, benefits, and a political voice.” On its website’s Resources tab, click “Client Issues.” What’s the first to pop up? It’s none other than “How to Deal with Nonpayment.” Several suggestions there mirror those of this blog post. However, the one to delve into is the Collection Letter Template. Download it, fill in the blanks, and take action. Other resources? If you obtain a deadbeat client through an online marketplace, such as Fiverr or Upwork, contact its resolution or support services for help.
- Escalate and engage outside collections or legal help
The Collection Letter Template referred to above lays out various options. The no-cost ones include filing a report with a state Attorney General’s office. Similarly, register the incident with the Better Business Bureau. Both of these avenues are not direct routes for receiving remuneration. They may work fully, partially, or not at all, but at least make life uncomfortable for your client. What to do when all else fails and you’re determined to get the funds owed you? Hire a collections agency, lawyer, or legal service. At this point, you will be spending money to get your money or, more realistically, a portion of it. Similarly, go to small claims court if the case meets the parameters, pay the required fees to file a complaint, and then prepare to wait weeks or months for a court date. Note: small claims court only renders a judgment; it has no enforcement powers to help collect funds. What does that mean? You can win the case and still not get paid.
- Use the tax code as remediation
Give up trying to extract the funds from a client that evades you or otherwise refuses to pay? As noted, this could and does happen. What to do next – or at any step along the way – depends on the amount of money at risk, your work commitments and schedule, and your tolerance for letting go as well as for continuing to hassle. In other words, cost-benefit analysis here you come. If it turns out you are at the end of your “Show Me the Money!” journey, acknowledge the impossibility of receiving payment. At that point, take a loss. But do it on your income tax. You may be able to write it off the nonpayment as a bad debt when you file, deduct the cost of goods sold, or follow any other course your accountant suggests.
- Freelance through a professional talent agency
Finding clients on your own is one avenue available to a freelancer. There are others. Instead of, or in conjunction with your own efforts, you can work with a professional placement firm. For example, Creative Circle bridges both ends of the spectrum. An established and reputable company, it serves clients that need to find freelancers and full-time employees. It fills those requisitions through posting job alerts to its other audience, which are the freelance providers themselves. Once vetted and approved by the agency, candidates may vie for opportunities. The agency shows a short list of the most suitable choices to its clients and then, for the person selected, the firm tracks timecards and administers pay. Yes, those freelancers in the system hired for assignments receive pay and do so weekly – no chasing after it required!
Freelancing has its advantages. Being your own boss, scheduling your time (or at least trying to), running a business, and working directly with clients are among them. Receiving payment for assignments occurs most of the time. And at others, it doesn’t. Follow the advice offered here to try not to get caught.
About the author.
You name it, she covers it. That’s the can-do attitude Sherry M. Adler brings to the craft of writing. A polished marketing and communications professional, she has a passion for learning and the world at large. She uses it plus the power of words to inform and energize stakeholders of all kinds. And to show how all of this can make a difference, she calls her business WriteResults NY, LLC