
Ask HN: As a freelancer, how do you ensure clients pay? - gpxl
What steps do you take to ensure clients pay you on time and what actions do you take when they don't?
======
julienmarie
First thing is the payment schedule. I usually do 45% deposit, 45% at the end
of the work, 10% when the site goes live. This ensure that I get at least 90%
of the contract.

Also, have complete Terms and conditions. One important point is all the
intellectual property that goes with your work => until complete payment, the
work is yours, and usage of it is illegal. With final payment, I usually issue
a letter transferring the intellectual property to the client.

An other important point is all the payment and refund policy. My policy is
simple : no refund, projects started are to be paid in full. If the clients
needs an explanation for that, explain that while you dedicate yourself to his
project, you have to say no to other projects.

Make it easy to get paid. Set up an online payment system or anything that
makes the relation frictionless. Even if it cost you a bit, it makes payment
way faster to arrive (no need to go to the bank or post office, find the
checkbook...).

One saying I like : Until you sign the contract, you have to be the mum of
your clients, reassuring him, explaining things, understanding him. Once
signed, you are his father : you are here to reminds him the terms of the
contract. It means that you have to be thorough on revisions, delivery dates
for contents, and of course, payments.

Trust your guts with clients. Usually, in my experience, clients who are hard
to get payments from are the one hard to handle from the start. Usually
individuals pr small companies, who try to get more for less. And know also
that you have the right to fire a client if you feel that things go bad.

But the best way to get paid : make outstanding work, be nice and
understanding. Know when you have to charge for a request and when it can be
free. Little treats are always nice if it cost you close to nothing and it has
value for the client.

I love this one : <http://vimeo.com/22053820>

~~~
jeromeparadis
What he said... That's what I've been doing since the 90s. It works well.

And, to answer the question what steps to do when they don't pay: not much you
can do other than asking. There aren't any worthwhile legal resources for
businesses or freelancers to be paid.

However, to not get there, make sure the payment schedule covers your work
hours including profit and if they don't respect the schedule, stop working
and mention there will be a delay in delivery. As he said, choosing well your
client by avoiding people who are too difficult from the start usually avoids
the worst kind of clients. As soon as your guts sees a red flag, don't ignore
it and walk away. Your instinct is rarely wrong when sizing trustworthiness.

~~~
porlw
One problem is preventing the client from making use of the software when
there is a dispute about payment.

Due to the laws regarding unauthorized access to computer systems, it may not
be legal for you to remove or even communicate with your software once it has
been deployed to the client. For internal systems it might not even be
physically possible.

To combat this, I like to incorporate a "dead man's switch". This means that
the software will stop working within a certain amount of time (say 30 days),
unless I actively intervene. The switch is only disabled once final payment
has been received.

A notice somewhere on the site or in the app will say "Evaluation software -
nn days remaining", so the client is aware and gets a countdown.

The switch doesn't have to be super sophisticated but it should incorporate
some element of encryption - that way if the client attempts to circumvent it
you can threaten them with a DMCA claim.

------
patio11
Be picky about clients. Payment risk is not equally distributed across all
clients, all work, or all contracts. Exercising a bit of professional
discretion upfront will save you grief later.

~~~
IsaacL
This.

The ebook career.fork() that came out recently had more on this. Basically,
you can learn to spot "clients from hell". There are certain traits that are
the equivalent of pointy horns and a whiff of brimstone:

\- excessive cheapness in initial negotiations

\- "but we can just find a guy on odesk for $5/hour" (reply: OK, you do that,
and come find me when it falls apart).

\- no effort to understand technical issues. Of course, lots of good clients
don't understand technical issues (that's why they hired you), but at least
show some interest in what you're doing.

\- unrealistic expectations (I want the next Facebook!)

\- very vague ideas about what they want. "I need a website made!" Lots of
good clients also have vague ideas, but its your job to help them figure out
exactly what they need. Try sitting down with them with a pen and paper and
listing what pages they need and an outline of the content for each one.

Now, some clients will happily sketch out Balsamiq type mockups, wheras others
will just give you a brief list of the pages they need and let you work out
the details. Both are fine. But if the client refuses this exercise, stay
away.

My big surprise when freelancing was that most clients are not from hell. If
you just avoid the jokers, there are plenty of good clients that value your
work and pay on time.

Other tips:

\- taking a deposit at the start is always good. It's like the client has
"broken the seal" and will be more willing to pay in future.

\- it's hard asking for payment. It's the social norm against asking for
strangers for money. One advantage of paycheck employment is the only time you
need to discuss money is in the interview. After the first few invoices, it
gets easier.

\- avoid getting desperate. When you only have one week's rent in your
account, you might be tempted to take on a bad client. Easier said than done,
but maintain a buffer of savings and start looking for gigs before your
current one finishes.

\- be a bit cynical. Even if the clients are the nicest, coolest people in the
world, if your code is on their server and your money is in their account,
it's quite easy for them not to pay you. If you control the code, and some of
the money (ie, a deposit), you're in a much stronger position.

~~~
aptwebapps
"- "but we can just find a guy on odesk for $5/hour" (reply: OK, you do that,
and come find me when it falls apart)."

Yes, except skip the 'find me when ...' part.

~~~
karmajunkie
My response to that kind of comment is "You can pay me now, or pay me later to
fix it. Its cheaper now, but you decide."

------
sheraz
In the famous words of Ben Affleck's character in Good Will Hunting,
"RETAIIIINER!"

(for levity) - <http://www.youtube.com/watch?v=5hWIr9_noRo>

Just as with other professional services (Law, Advertising, Accounting), I use
a retainer model.

This works for me and filters out the clients who I feel value my work.

For example:

    
    
      * $10000 put into an account that draws down against hours worked / daily / weekly output.
      * Invoiced weekly through freshbooks 
      * As retainer moves below threshold in retainer it gets replenished.
    

This keeps all of us honest, and it keeps me in a cashflow positive situation
(usually).

Also, read up on patio11's posts here on HN. He's a smart guy and offers a lot
of insights into what it is like to consult for a living.

------
scotty79
Amazingly most people do pay (eventually) and the worst thing you can do is
obsess about the ones that didn't pay.

When people owe you money it makes strange things to your brain. People may
keep you hostage by withholding your money from you. You'll feel terrible.
Best thing you can do is chalk up the ones that didn't pay as a cost of doing
business and paid learning experience that tunes up your anti-asshole filter.
My sanity immensely once I understood that sometimes you get screwed on your
investments, it's impossible to avoid that in all cases and it's ok.

------
sgdesign
This kinda goes against the trend of selling yourself as providing value and
not merely your time, but you can also ask to be pre-paid for a certain amount
of time.

Similar to a pre-paid cell phone plans, ask your client to buy 10 hours (or 5,
or 20) of your time, work those X hours, repeat.

This is the system I've been using myself for the last couple years, and I've
never had to worry about getting paid. And I know I'm going to raise some
eyebrows with this, but I've never had clients sign contracts either.

------
jph
We use deliverables, milestones, a work breakdown structure (WBS), and
statement of work (SOW) contract.

These describe the scope, schedule, cost, payment agreement, refund policy,
etc.

<http://en.wikipedia.org/wiki/Work_breakdown_structure>

<http://en.wikipedia.org/wiki/Statement_of_work>

When we reach a milestone, we invoice the client for the amount we agreed to
in the statement of work.

------
timjahn
It generally starts with the type of client you're dealing with. There's a
type of client that will pay all the time and there's a type of client that
will haggle with you every time. The better you get at learning how to spot
them, the less trouble you'll have getting paid.

With my new startup matchist (<http://matchist.com>), we're actually tackling
both these problems (finding the clients that will actually pay on time, every
time, and guaranteeing that they will). We vet all clients and escrow payment
so that you know you will actually get paid when work is complete.

------
kaisdavis
> What steps do you take to ensure clients pay you on time and what actions do
> you take when they don't?

1\. I only work with clients that I trust. How do I find out if I can trust
them? Extensive interview process. Is their business sustainable? Have they
worked with freelancers before? Do they have references for me?

2\. I have clients pay me up front. No, seriously. I have a contract that
lists my rate and asks for the money up front. If they want different payment
terms, we can negotiate from there (and usually to a point that we're both
happy with).

3\. I don't let myself get 'underwater' with a client. I use Harvest to
monitor the time I spend working on client projects. It sends me a
notification when I get within (80%) of the time allotted on the contract. I
have a text expander snippet that I fire off to the client with something like
'Hey, we're at 80% of the time you've paid for on the project' and let them
know if I think we'll need more time or need to reduce the scope.

4\. I attempt to collect in this order:

(a) Phone call to the company [the person I'm working with on their side]
confirming they received my invoice (10 days after due) (b) Phone call to the
person who signed my contract confirming they received my invoice (15-20 days)
(c) Repeat phone call to the person who signed my contract (30-40 days) (d)
Letter from my attorney

How often have I had to use these? Once. Why so infrequently? Because I follow
points 1, 2, and 3 with new clients.

------
obviouslygreen
Use a contract and set your payment terms clearly; bill at defined regular
intervals (with a partial up-front payment).

Make sure there's a late fee, and enforce it! You will almost certainly find
clients that don't pay on time, and letting them essentially get away with it
will only make it worse.

The one measure I've found that puts honest but lazy clients on the ball,
though, is stopping work as soon as payment is overdue and not continuing
until they're current (including the late fee).

------
raintrees
Sorry, Major edit. I did not answer the question as posed first.

We are primarily a service business that also sells hardware and software, and
we design custom databases. The software almost always has "pay as we go"
milestones in the contract. This keeps us funded and forces checking in with
the client at logical points to make sure the design is going the right
direction.

All of our invoices show Due on Receipt, we grant 30 days, then either a
cheerful reminder, or a late fee and reminder.

Too many late invoices (three - we are rather forgiving) with no communication
ahead of time gets the client dropped.

On the service/sales side:

With new clients or large orders, we ask for deposits or retainers.

We also offer reduced rates of blocks of hours if paid in advance (can help
with starting cash flow).

As an aside, we use referral fees paid to people who refer clients to us.
Arbitrarily I arrived at 30% of first hour and %50 of second hour (None beyond
that) charged to the new client is paid to the referrer (Service work only).

First, it gets us more referrals for work, and second we get to take advantage
of the reputational value of the reference - Few people want to flake on their
invoices if it is going to make it back to the referrer.

YMMV.

------
scotty79
Don't do anything beyond talking before money is on your account.

If you suspect that client might be opposed to paying all of the money up
front double the price and take 50% up front. You can give discount afterwards
if everything goes well. I noticed it improves relations with the client.

If your project is large and can be split into stages then do that and take
all the money for each stage before starting it.

------
fifteen3
2011/03 Mike Monteiro | F*ck You. Pay Me. <http://vimeo.com/22053820> <\--
Watch it!

------
chime
I invoice weekly. I include a detailed list of tasks completed in each invoice
and the time taken per task. I use toggl.com and bill in tenths of an hour.
When working with clients with multiple employees/project-managers, I include
who commissioned the work and for which project.

Since I check in my code, static files, documentation, and all resources along
with the weekly invoice, the payment is due immediately. The client is aware
of my progress on a weekly basis and knows exactly how many hours I have spent
on which feature. I've worked like this for over a dozen clients and not one
of them has ever had a problem with it.

I do not work on fixed-cost contracts but rather fixed hourly rate contracts.
I give detailed estimate (Statement of Work) before the contract is signed and
if I go over the estimated hours for any task through no fault of the client,
I eat the overage costs (teaches me to quote better). If I am under the
estimate, I bill exactly for what I worked on.

------
ilaksh
I think Freshbooks makes it easier to bill (it sends the invoice in an email),
easier to pay (they can click on a link and use their credit card) and
provides a 3rd party record. Also since its completely online, there is no
excuse related to waiting for things to go back and forth in the mail.

Usually if they don't pay right away I explain to them that I need them to
always pay within a day or two. If they forget to pay after that, one extra
email or IM is usually enough.

You might have to actually call them.

I also tend to not work on a project between the time that an invoice goes out
and when it is paid.

From my experience once they are actually aware of the bill they usually pay
within 0-3 days. If it takes longer than that, maybe you can get better
clients.

------
centdev
Our policy is 50% upfront before any concept meetings even begin and 50% upon
completion before we deliver and launch their site. We never do Net terms
anymore in the 15 years building web and mobile apps. We sometimes get the
"accounting only pays net 15 or 30". Our answer to that is to invoice the
balance and schedule delivery when the check arrives. If you are upfront with
your terms, they will typically follow your standard. In our experience we had
1-2 clients in the beginning that did net 30 which turned into 60. We were
small and cash flow was tight so it meant we needed to float expenses. No
more.

------
orthecreedence
1\. Get good clients.

2\. Get a deposit (ideally one month's pay) up front. If your client doesn't
want to put down a deposit, find another client

3\. If client doesn't pay you for more than a month, _ALL WORK STOPS_ until
you have their money _in your bank account_.

Problem solved. If your clients are in town and aren't paying, feel free to
drop by their office and remind them that you aren't working until you get
paid. An in-person reminder is a lot more influential than a piece of paper
with a number on it.

~~~
unsquare
"2. Get a deposit (ideally one month's pay) up front. If your client doesn't
want to put down a deposit, find another client"

Same here , if they aren't willing to pay a % up front , the discussion ends
there. Move on to the next client.

------
hluska
Unfortunately, the longer you freelance the greater the odds that you'll find
one who doesn't pay you.

In general, I think that being nice to people, having fair billing practices,
and doing good work are the best ways to make sure your clients pay on time.
As well, when I'm preparing an invoice, I like to email a client and say that
I'm preparing an invoice...I usually do net 30 but I wanted to know if there
was anything I could do to make things more convenient.

------
matchoo
Spending time up front to understand payment terms, calmly, carefully,
contractually, means that both sides understand what they are getting into.
Nobody would have dared break that word, on both sides. Nobody broke that
word. So it sounds like the upfront handshake was either rushed or
nonexistent.

------
goatcurious
Does anyone use a payment escrow? Like what some market places like Elance
provide?

~~~
jph
We used a payment escrow for a project and it went perfectly. The project had
a clear deliverable and a clear way to verify success, which made it
especially easy.

------
rbp
I am owed over $1000 by some companies in US and UK for freelance work. Over 6
months ago now. What do you suggest? Forget about it? Debt collection? Contact
spouse via Facebook?!

------
zrail
Milestones. For example, half up front and half at delivery. 25% up front, 25%
at a reasonable halfway point, 50% at the end. That kind of thing.

------
hoodoof
Warranty is valid only if invoice paid on time.

~~~
j45
This is a great idea.

~~~
hoodoof
We NEVER get paid late using this approach, in 8 years of doing business.
Admittedly we are not doing software development but the principle works as
long as you can get a warranty defined in your terms that does not commit you
to doing free feature work rather than bug fixes. Shoud be do-able.

~~~
j45
I typically say when a feature is released to testing/customer acceptance, I'm
done the spirit of what I was approved to work on, and the work is both
billable in full at that point, and the warranty clock of 30 days starts.

------
warmwaffles
payment up front, like a deposit. No money, no work. That simple. No promises
either. Listen to Randall for a bit,
[http://robots.thoughtbot.com/post/36071144342/episode-23-as-...](http://robots.thoughtbot.com/post/36071144342/episode-23-as-
a-consultant-its-always-your-fault)

------
AdamGibbins
Reward early payments.

~~~
rhizome
This is what I do. I only have one main client, and it's a more-or-less
ongoing arrangement, but I invoice on the 1st & 16th and give a percentage
discount if they pay within 10 days.

~~~
porlw
This is a much better idea than trying to impose a late payment fee - set your
rates 10% higher, offer a 10% discount on early payment.

------
jacques_chester
The squeaky wheel gets the grease.

------
bravoyankee
Fifty percent upfront. Unless it's a smaller project. Then, it's 100% payment
upfront. No exceptions.

~~~
biscarch
What price range are the projects? If you don't mind me asking.

~~~
bravoyankee
I take into consideration the finances of the person or company, but usually
it's $300. That or less gets paid in full before I begin.

