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Learn how getting paid works from your client's perspective

money + taxes Jul 17, 2020


In this episode, we talk about one of the most challenging aspects of freelancing: getting paid on time.

This is something that can be frustrating, scary, and cause a lot of stress for you. Just like any story, there are two sides to this. In this episode of Finance Friday, we’ll be hearing from Beth about what goes on behind the scenes when you send an invoice to your client. We’ll walk through the entire journey, from setting up your payment terms, to submitting paperwork, to how to properly format your invoices, and more. Our goal is to help you do everything in your power to increase your chances of getting paid on time.

It’s really important to remember that most of the time, late payments on your invoices aren’t personal. As we'll learn from Beth, it’s usually a cash flow issue, a lack of good internal processes on the client’s side, misaligned expectations, or some other internal issue going on that’s out of your control.

While you usually can’t do much to fix internal process issues for your client, it does help to understand what’s going on, learn how to ask the right questions from the beginning, and adjust your expectations, so that this situation can be improved.


Full Episode Summary


Client Management is Relationship Management

One of the most important aspects of freelancing is maintaining a healthy relationship with your client. And just like any other relationship, it takes work, practice, trust, and mutual respect. 

When your client isn’t paying you on time, the relationship starts to break down. If you’re sitting down to do work for your client with this nagging frustration that you have to bring up a late payment again on your next call, you’re not going to get your best work done. 

It’s really important to remember that most of the time, late payments on your invoices aren’t personal. It’s usually a cash flow issue, a lack of good internal processes on the client’s side, or some other internal issue going on that’s out of your control. Remember that accountants have a very specific job to move money around, within well-defined parameters. And sometimes when a client pushes back for more documentation, it is to meet an internal protocol, not a personal dig or attempt to undermine you.

While you usually can’t do much to fix or speed up these issues for your client, it does help to understand what’s going on, learn how to ask the right questions from the beginning, and adjust your expectations, so that this situation can be improved. 

So, let's get a better understanding of what's going on from your client's side so that you can work with their system; not against it.


My Proposal is Accepted … Now What? 

First things first: get to know the Accounts Payable person by name and have their contact info. Make sure at the outset of the relationship you check in with them and make sure they have everything they need from you, like a W-9 (and as Beth says, it never hurts to just have a bunch of these ready to go!), and and any other internal forms that need to be completed to set you up as a vendor. 

Find out how frequently they do check runs. Have the AP person educate you on what you can do to get paid faster/on time. People in accounting are so isolated from everyone else, so reach out and make yourself known! Find out what they need, and allow them to find out what you need. 

If your client does not have an AP person however, then you'll need to have this convo with your client. Try to get a sense of how much time they need to process invoices - is it 15 days? 30 days? Do they have a certain day of the week that they process payments? For example, if their rhythm is to handle all invoicing and business-type stuff on Mondays, then it'd behoove you to send your invoice on a Friday.

The point is to try to understand your client's company workflow, and jump into that, versus trying to force them to fit into yours. Of course it's preferred to have them work exactly with your terms, but that may leave you not getting paid on time and experiencing friction with your client. In either case, having a conversation up front and working together to figure this out is what will give you the best chances of getting paid on time. 


How to Bill Clients

If you will be billing 4 figures or more per month, Beth endorses breaking your billing into smaller amounts (weekly; every 2 weeks; etc.). This helps your cash flow and the client’s. It also gives you a little more leverage; if they aren’t paying your bills, you can suspend work until they do and you are not out as much money.

You are also more likely to get paid on time when a client sees a smaller amount on each invoice, and breaking up your billing will help with that. Remember, AP people don’t have a lot of power to alter the payment schedule, so discussing that schedule with your client and/or AP folks can help you determine how often to invoice them.

Keep in mind that companies have tight structures for their finance department, and it can be difficult or impossible to alter their payment structures. So it's crucial and in your best interest to try to work within this structure.

Beth doesn't recommend sending invoices for work that hasn’t been done yet, as this can complicate things for the AP department. 

To up your chances of getting paid on time, it's crucial to have these conversations with your client from the beginning. Then, do what you can to jump into their flow, versus making them work with your desired flow. Even if you have multiple clients with different terms, you’ll find this way easier to manage than the stress of not getting what you need on time.


How to Create The Perfect Invoice

Another key step in helping you get paid on time is ensuring that you've provided the right information to your client on your invoice. Below, you will find what to include from the top down of your invoice:

Top Half

  • Your company name
  • If you are a sole proprietor and have a fictitious Business name, and use your social security number as your tax ID, make sure you include both names as well as your Tax ID or SS # on your invoice. Remember, the IRS does not recognize fictitious business names.
  • Your current address, phone number, and email address. Make it easy for someone to get in touch with you if they have questions.
  • As silly as this may seem, include the word INVOICE at the top.
  • The client's company name, your contact at the company, and the company's address.
  • Brief name/description of the work. This is intended to help AP know where to go for approval. This is not the place to put the specifics of the project; just something like: Marketing consulting for Bob Jones.
  • Dates - include the Invoice Date (the date you're sending it) and the Date(s) of Services provided. Beth’s pro tip: Have the date of the invoice be the same as the last date of the work.  Accounting staff are trying to keep the activity matched up with the month.

Middle Portion

Consult the client about how much detail they want. For some clients, if you have a fairly consistent service or role you provide, it may be sufficient to just summarize the role and the dates. Include detail if you want to remind a client of everything you accomplished for later conversations about what you worked on. Since this part will vary so much depending on the client and the project, you'll want to work with your client on what exactly needs to be included here.


Bottom Half

  • Any notes or payment terms.
  • It's always nice to include a personalized thank you note here. Mention how excited you are to be working with them, thank them for working with you, etc. 
  • The exact name they should write a check to (i.e. - is it your business name? your personal name?)
  • If you have an alternative payment method you prefer, and you've verified that the company will be able to use that method, include the payment details on the invoice (wire transfer info, Venmo, Paypal, ACH etc.)  Sometimes a company will use ACH or and they will send you a special form to fill out to get set up. Either way, make sure you get this set up well in advance so that you don't experience delays getting paid. 

Click here to access a Google Doc invoice template that we created just for you!


Other Pro Tips

Invoice as quickly as you can after the time period ends. When the accounting staff is trying to close the month and invoices come in 2 weeks after the end of the month, it really is a hassle for them. Don’t be coy or cute about it. It is their job to sometimes process a large volume of invoices. They are not emotionally attached in any way or judging, so just get it done and send it in, for everyone’s sanity and peace of mind! 

Ultimately, a professional invoice, delivered on time and in a way that works for your client’s billing cycle, will help you get paid faster. In fact, it will even set you apart from the crowd (sad but true!), and strengthen your relationship with your client. 

IF YOUR ADDRESS CHANGES during the engagement, or after the engagement is over (but before the end of the calendar year), be sure to contact AP and update your address, so your 1099 (your tax form as a contractor) goes to the right place. Don’t assume that the accounting department will get the memo, even if you tell your client. Tell the accounting department directly. They often have many 1099s to get done by the end of January, so if they have all of your (correct) info, this will make their life WAY easier. Remember, if you hire a subcontractor, you will need to give them a 1099, too!

Know how to make collection calls, or follow up with AP about your payments. It does not have to be scary or adversarial. Just call and check up, accounting people are human beings, too! They’re just doing their best. Beth’s suggestion is to keep the convo going, be flexible, and don’t take things personally. This will also help you from getting too far behind in your balances, as Beth once did when she was stiffed for $5,000 by a client because she wasn’t diligent in following up (YIKES).

We sometimes have weird relationships with money, and for some of you who are newer, this may be one of the first times you’ve had to ask someone to pay you because you’re used to getting payroll. However, this is what the accounting department does all day long, so don’t be self-conscious about it! You may have to work on this, but we are here to help.

The big takeaway that Beth wants you to know is to just relax, don’t take things personally, and work to keep open communication with your client and their AP person/folks. Also, make sure you talk through all of this at the outset of a project so that you have a plan in place before you actually need to bill. 

We hope these tips help you feel more confident about your billing processes, and allow you to up your chances of getting paid on time. If you have more questions, or want us to explore anything deeper, DM us on Instagram, or shoot us an email: [email protected]

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