One of the things that sucks about being a freelance writer is handling payments. You won’t automatically get paid. Even when you’ve already agreed upon a price with a client. That’s the unfortunate reality of freelance work. And it’s a larger issue than many of us like to think.
According to some studies, 70 percent of freelancers have dealt with late payment. About 30 percent of freelancers deal with late payments regularly. When it comes to this type of work, late payments and overdue invoices are not a matter of “if.” Rather, they are a matter of “when.”
We’ve discussed the importance of making an invoice when you are self-employed before. And given tips for how you create an invoice. Invoices are essential for minimizing the risk of late payments, but they are not a guarantee. You can send out an invoice and still watch it become weeks, or months, overdue.
It’s no surprise that prevention plays the biggest role in reducing late payments. This includes promptly invoicing, detailing payment terms upfront, setting a late payment clause, and sometimes charging an upfront deposit for your work. Implementing many of these is good practice, anyway.
But, they don’t halt the issue from happening. They reduce the chances, sure. Yet, there will still be a late payment or overdue invoice that you must deal with on occasion. So, how exactly do you deal with them? Without causing friction with clients, of course.
Why Are Clients Paying Late?
Despite the frequency of late payments, most of them happen for innocent reasons.
One common reason for late payments are cash flow issues. When a business has problems with cash flow, they struggle with paying invoices on time. This includes your invoice. Likely along with several other invoices. They aren’t stiffing you. They just don’t have the money for payment yet.
Or, if they have the money for some payments, freelancers are sometimes low on the list of priorities. The invoice you sent out isn’t seen as urgent. So, the client doesn’t make a point of paying you on time.
Internal issues at a company also contribute to late payments or overdue invoices. Depending on how the company is structured, some invoices require multiple approvals before being paid. This delays when you actually receive payment for your work. Sometimes, invoices aren’t even processed correctly, thus delaying payment.
Finally, there are miscommunication issues. Sometimes, the terms of the invoice are not made clear in the document itself. If it’s too full of jargon, it’s likely that clients got confused. The terms and conditions are not always clear to everyone. So, miscommunication ends up being the reason behind a fair amount of late payments. Make sure the documents you send out have clear, plain language.
Escalating Without Sacrificing Professionalism
When payments or invoices are late, there are professional ways of handling it. You don’t want a situation where you lose professionalism and potentially the client. Especially since the delay could have resulted from a myriad of unfortunate circumstances.
1 - 3 Days Overdue
At the early stages of a missed payment, send a friendly reminder to the client. Keep the reminder short and light-hearted. Don’t assume that the invoice is being ignored. Assume it just got overlooked. Attach the invoice again, in case the client needs it, and leave it at that.
These friendly reminders address many of the innocent reasons behind late payments. If the invoice was lost or buried in a mass influx of emails, it provides it again. And reminds the client of the due date. If not, a friendly reminder won’t bother most clients. If there is another delay in payment, they often inform you at this point.
7 - 14 Days Overdue
When you don’t receive a response to your friendly reminder, send out a firm follow-up. In such messages, remind the client of the due date, the contract terms, and any late payment penalty. Express a desire for solving the issue of the late payment before penalties. And request that the client provides you with a specific time when you will receive payment.
This follow-up shifts your tone from light-hearted and friendly to direct. However, it does not eliminate professionalism.
14 - 30 Days Overdue
By this point, the issue has become more serious. With no response for either of your previous two follow-ups, send a formal notice. This notice can be an email, though having it as a separate attachment looks better.
In the formal notice, outline the debt. Reference the contract and state the penalties of non-payment. If you are working on a project for the client, stop providing more work at this point. The prior work you completed has still not been paid, so continuing is not required.
Also, if contractual agreements concern you, the contract gives payment terms and conditions. Refusal to acknowledge you or pay broke the original contractual agreement.
When halting work, let the client know what you are doing. And let them know why. While you don’t owe them more work, maintaining a good level of communication promotes professionalism.
30 - 60 Days Overdue
When payments are this late, and you have not received any communication from the client regarding payment, send a final notice. Title the document as a final notice, or a letter before action, or whatever title holds legal weight in your area. Let the client know that they have 14 days to pay the full amount of unpaid debt. And state the next steps if they do not pay within that time-frame. This may include going to small claim court or getting a debt collection agency involved.
60+ Days Overdue
Finally, pursue legal action. Depending on your area, the amount owed may or may not be suitable for small claims court. If it is, then file a motion. You don’t always need a lawyer for these sorts of legal proceedings. But, it depends on the amount owed, your jurisdiction, and your own peace of mind. Obviously, hiring a lawyer may increase court costs, but sometimes it is worth it. Plus, if you win the case, the defendant is often tasked with paying the debt, plus any legal fees you accrued.
To aid in your proceedings, you have plenty of proof that you attempted to resolve the non-payment issue prior to legal action. That’s because you sent out emails and formal letters over a period of time that gradually escalated and sought a solution. This documentation is essential. Without it, enforcing payment is challenging. It turns into a “he said, she said” situation.
Communication Strategies for Escalating
Some freelancers are uncomfortable about pursuing unpaid invoices themselves. And many have found that their clients respond better to certain types of communication. While these do not change the steps for escalation, they vary how freelancers communicate.
One option is having an employee reach out to clients with late payments. This employee is often fake, since most freelancers work by themselves. Yet, having a fake employee sometimes gets faster responses from clients. When clients get follow-up emails from a freelancer, it is obvious that the freelancer is the sole employee. When it comes from a fake employee, the business appears larger. And that translates to more urgency.
Another strategy is using a third-party authority. Let me explain, a freelancer sending routine follow-ups is being ignored. They are not seen as an urgent situation. That freelancer instead informs the client that their accountant noticed an unpaid amount. And that accountant is balancing the books for the IRS and taxes owed. The IRS becomes the third-party authority. Since the IRS and tax requirements are more serious to some clients, they take these communications more seriously. This increases the likelihood of them responding to invoice and payment requests sooner.
Staying Proactive Limits Overdue Invoices
As mentioned, prevention is key for reducing overdue invoices or late payments. Nothing eliminates the problem. But such is life.
Stay on top of your work and your clients. If you have an ongoing client who has paid late in the past, send them a reminder about a week before the invoice is due. This often prevents you from chasing down that client for a delayed payment.
Further, consider implementing a deposit structure or milestone-based payment system. Having a deposit means that clients pay you a certain amount before you start working. This protects you by giving you some money upfront. And it also solidifies the relationship with clients since they have already invested in the work.
This doesn’t eliminate the need for transparency, though. For the remaining balance, have a clear due date. And have specific late payment fees and when they apply.
Still, despite all your best efforts, you’ll encounter an overdue invoice. Be persistent. Even if it goes beyond what you are comfortable with. Communicate with clients. Give them plenty of reminders and warnings as payment delays continue.
Don’t worry about being seen as annoying. You have a duty to yourself — and to your work — to pursue what you are owed.