We all know that projects consist of three main stages; marketing (getting the job), doing the job itself and collections (getting paid for doing the job). Many independent professionals enjoy and are very good at, the second stage, aren’t so crazy about the first stage and absolutely loathe the third stage. But let’s be honest, unless we our volunteering our time, no matter how much we enjoy what we are doing, we are doing it for the money. If we are not able to collect what is rightfully ours we wont stay in business for very long.
In my career I’ve worked both as a freelancer and as a Project Manager for a company that does outsourcing projects. I can state unequivocally that it is much easier getting paid on time as an individual than as a company. I suppose that this is because people feel that an individual needs the money to directly feed herself and her family while the company can wait a little, there’s no rush. When I call as an individual to enquire about late payments the response is almost always apologetic and the matter is usually resolved quickly. I have had only one person stiff me as a freelancer and that was because I broke my cardinal rule: never do work for individuals, only for companies. The individual in question lives in the village next to mine. I called him four or five times, and each time he said that he would get the money right out to me. Needless to say he never did, and I gave up. For the sums involved it wasn’t worth pursuing it either from a monetary or an aggravation point of view.
My collections steps are as follows:
- My collection strategy starts before I officially start the project. Before putting out a bid I always do some research on the net about the company to see if they are having financial problems. I also check with colleagues to find out if they have had any experience with the company. When I visit the company I look around me to try and assess the financial strength of the company. Is the carpet worn and filled with stains? Are there row upon row of empty cubicles? You might want to think twice about working for them.
- If working on a per project basis, to avoid completing the project and not getting paid anything, I always ask for a payment up front and several payments at milestones.
- To avoid delays, if you have to open a vendor file do so at the beginning of the project, not at billing time. If you are getting paid by wire make sure that you give the client the correct bank information.
- Get the invoice out on time and make sure that the date the bill is due appears on the invoice. It may be a good idea to send the invoice both to your contact person (who usually has to approve it) and to the billing department, as your contact may space out and forget to forward it.
- If you are working by the hour submit a log also. Not all clients explicitly request a log, but I find that it serves to prevent misunderstandings.
- Call your contact within 2 -3 days to confirm that they have received, approved and forwarded the invoice to and to see if there are any problems.
- If the payment hasn’t arrived within 4-5 days after the due date write them a polite e-mail explaining that the money hasn’t arrived and that you would appreciate it if they could check into it.
- Give them another week. If the money still hasn’t arrived send them a slightly less polite reminder.
- After three weeks I call to see if there is a problem. As I said above I have never been stiffed by a company but sometimes companies have liquidity problems and your contact may be embarrassed about this. Ask them to give you an honest picture of what is going on for financial planning purposes. There’s no sense in getting mad at your contact person as they are probably not involved with the money end of things. You can ask to speak to someone in accounting to find out what is going on.
If you find yourself being owed money by a company with financial problems you are in a bit of a bind. On the one hand if you stop working until you get paid, they will probably move you to the back of the line of creditors because they don’t need you anymore and if they recover they probably won’t work with you anymore because you were disloyal. If you keep working with them you may find yourself deeper in the hole. This has happened to me twice and both times I simultaneously tried to cut back my work with them as much as possible and worked out a payment schedule involving post dated checks.
In any case there is no great honor in having to sue a client to get paid and unless it is a meaningful sum it may not be worthwhile.