
Just pay me. - samuellevy
http://blog.samuellevy.com/index.php?p=post&id=21
======
rwhitman
Late fees are critical. In some businesses the accounting department will
manage debt by paying off vendors in the order of who charges the most
interest. If you don't have a late fee, you get shuffled to the bottom of the
pile and stay there. Accountants are generally hardwired to avoid penalties,
so if they see there are penalties they'll pay before the penalty period
(provided they have the money).

However I have found that if your late fee is high, they will simply pay the
invoice and "forget" the late fee. And then you're left squabbling over the
late fee, which is quite annoying.

Also note that I disagree with OP's interest scheme - in my case its a flat
1-2%. For a freelancer you don't want to tip the scales into lawyer-worthy
disputes...

~~~
craigmccaskill
A late fee is a tool to encourage payment, if they ignore it and pay even just
the invoice amount earlier than they otherwise would have you could say it has
done its job.

As long as they pay the invoice, most people at that point will waive the late
fee (providing it's not a very large sum of money as would be the case with
the suggested 10% per week). I know I've done this in the past when a client
has called me up after weeks of nagging and apologised for the late payment
and the lack of a fee.

~~~
brador
In addition, the late fee can come as a shock to the reluctant payer and spur
an email expressing said shock. This is a great time to offer a waiver of the
late fee if they pay by 5.

------
kaffeinecoma
I've found that I get dramatically better clients by requiring 50% payment up-
front, and then invoicing weekly. People who balk at the 50% terms are likely
to be problem customers, and are best avoided anyway. The weekly invoicing
helps new clients understand how much software costs, and prevents sticker
shock weeks after the project has begun. Once I have an established
relationship with a client that I trust, I'm happy to relax the terms for
everyone's benefit.

~~~
ktizo
Thirds is a good one for short projects involving a handover and signoff;
1/3rd to start, 1/3rd on handover and 1/3rd on signoff.

~~~
erichocean
That's worked for me going on 10 years now.

I also agree with the OP that you get better clients as well.

------
ttol
This won't work in practice. There are laws in place to prevent sky-high
compounding interest rates, late fees, etc.

I would suggest that you simply take 50%, or some other large portion of the
project, up front. Then, as you near a milestone, ask for another piece of it.

Billing at the end in one large chunk and then charging enormous rates just
means you're not de-risking on the on set, and you're screwing a customer
relationship.

Also, industry norms are NET 30, and some customers may even operate, and
push, on NET 90 terms.

~~~
netcan
The reality is that almost no matter what you do, getting invoices paid is a
hurdle and a pain. This isn't necessarily the clients being assholes or being
cheap or being broke. It's just a law of nature.

It's not just invoices either. If you need clients to give you feedback,
provide copywriting or do any other homework it can take too long. You'll walk
out of a meeting. They will promise it by Friday. 3 months and 12 reminders
later and you get it.

~~~
ttol
Agree. OP should work on better account receivable practices instead of
pretending to be a loan shark.

~~~
slantyyz
Or you might go so far as say OP should work on knowing how to pick better
customers, which would make his A/R life even easier.

------
bdunn
I bill hourly, and now _only_ do prepaid work. Shameless promotion, but
invoice issues are the reason I wrote Planscope (
<https://twitter.com/brennandunn/statuses/226414132566585344>). The more I can
drill into client's heads that time == money, the less likely I am to get into
invoice troubles.

I haven't had ANY issues since I made it clear that I'm selling my time and
not a certain product, and that clients can see their current budget usage at
any time. My current 6 month contract pays me in advance for 80 hours, and
when he's about 20 hours from needing to fill up the tank again, I invoice
him.

Over the last few years, I've spent WAY too much time chasing after money. I'm
tired of it.

~~~
nathanbarry
Have you had any clients not work with you because of the full up front
payment requirement? Though I guess that would be a good indicator for
problems in the future. I am thinking of switching to this for one of my
current clients.

~~~
bdunn
I've only had issues with one client, who is a national non-profit with
procurement, etc.

The risk for the client is that you'll flake out. If you have a track record
of being reliable (When I'm subbing out work, reliability and professionalism
> technical capacity in most cases) then there's really no reason you
shouldn't be getting prepaid work.

You're the one at risk. You risk losing the time spent working, which is non-
renewable.

------
lnanek2
Break payments up into up front and milestones. Ditch any clients who are bad
about payments. Worst case you are out the payment for one milestone, but you
bought the business intelligence on who is a bad client to work for. I had to
leave an Android startup that was at the top of the Market rankings, and
getting tons of traffic due to that no matter what they did, due to issues
like this and I am much better off for it.

Noom/Worksmart Labs would often "forget" to pay me some months, or
"accidentally" pay me too little other months. They messed up paying my gym
benefit for months once and I took over, then they argued for 10 emails and a
a meeting when I asked them to contribute any amount at all. They'd frequently
agree to do things like update the address I was paid at which I needed for
immigration paperwork, then never do it because they wouldn't pay their
accountant either. It was just hell working for them, and switching to other
companies has been great. I actually get to focus on work instead of spending
all my time seeing how the company is going to try to cheat me next and
dealing with it.

------
Tyrannosaurs
In my experience the main thing you should do is make sure that your contract
is absolutely clear on the fact that you own all work until it is paid for in
full.

If you get into paying late / non-paying scenarios, the main thing you want is
leverage and in most cases this is the strongest leverage you're likely to be
able to gain.

~~~
anthonyb
If you have a contract, you're already well ahead of the game. Most contracts
will include all of this sort of stuff for you, and all you have to do with
non-payers is wave a threatening legal letter at them.

If there's no contract, the best that you can do is a cash leash (when they go
over $x overdue, work stops) and set it low enough that you can cut them loose
without losing your house.

My take on dealing with "Squirrel" clients here:
<http://teh.oarsum.com/posts/you_are_all_squirrels.html>

~~~
rmc
Obligatory: Just because it's not written down doesn't mean you have a
contract. Oral, implied contracts are still legally contracts.

If it's written down and signed, it's much easier to know what everyone has
agreed to, so that is _much_ better.

~~~
anthonyb
That's right, but it would increase your cost of litigation substantially,
since you'll have a much longer court case trying to prove that.

It's not something that you really want to rely on.

edit: Just an addendum - most of the deadbeat weasel clients know that verbal
contracts don't carry a lot of weight, so the _threat_ of being able to sue is
really the important part. (Ideally you refuse the deadbeats upfront, but it's
hard to tell sometimes)

------
unreal37
This is known as the "Blockbuster Video" model for treating customers for
being late. How did that model work out for them?

Dude, these are your CUSTOMERS. Yes, don't be a doormat and YES it sucks
waiting 3 months for a check when you expect it in two weeks. But sending 10%
a week interest notices for being as little as 1 day late is going to backfire
on you. No matter how great you are.

And what will potential customers think of blog posts like these...

~~~
john_flintstone
>This is known as the "Blockbuster Video" model for treating customers for
being late. How did that model work out for them?

It worked fine until their industry (renting videos and DVDs) dwindled to
nothing. Blockbuster's demise had nothing to do with late fees.

~~~
TylerE
Really? Besides the selection, I think Netflix's keep-it-as-long-as-you-want
policy was a big reason it took off.

~~~
jamesbritt
They're also charging your credit card each month. There's no notion of late
fees because you're paying all the time.

~~~
TylerE
True, but that's ok.

The real boon to the netflix model is that it doesn't make you consider
individual decisions financially. Once you're on the service, deciding to see
something, or keep it longer, or whatever, doesn't have financial
implications, so you don't even think about it.

~~~
jamesbritt
_Once you're on the service, deciding to see something, or keep it longer, or
whatever, doesn't have financial implications, so you don't even think about
it._

Well, it does, though maybe people don't think about it. It's the "health club
membership" model. Pay for stuff you don't use.

Just like people figure out they never go to the gym, at some point though
some people (such as myself) realize, hey I'm paying each month for Netflix
but I don't bother getting new movies (or get anything I really care for), so
why not cancel and go for the a la carte Redbox.

------
bdunn
I'm not a lawyer, but in my contract my attorney specified an interest rate of
1.5% per month for overdue invoices. That at first seemed absurdly low to me -
I wasn't dealing with thousands of receivables. This was probably my only
client, and that percentage rate was unacceptably painless for a defaulting
client.

However, he said that there's a legal limit (in the US?) for interest rates
you can apply to an invoice. Does anyone know the validity of this?

~~~
Spooky23
The legal concept in called usury, and it varies by state. New York prohibits
interest in excess of 30%.

States where credit cards are issued from have no usury -- Delaware, South
Dakota, Utah, etc. States where you see retail payday lenders, "title loans",
etc generally have high usury rates.

You need to be careful, because application of the law varies by state. For
example, if someone is able to sue you under New York law, a judge can void
the _entire debt_. Also, serving members of the military can have their
interest obligation limited to 6% in many circumstances.

Generally speaking, a late fee should be an incentive for prompt payment, not
a punitive measure. I would refuse to sign off on any contract with a vendor
that such a capricious and draconian late payment policy. If minor delays in
payment are a huge problem, deal with the issue up front and collect an
upfront payment before commencing work. Sneaking in some excessive (and
legally dubious) penalty is not good business.

------
taude
Speaking from experience, Net 10 is totally unrealistic, unless you're working
for one of those contracting, body shops...in which case, you're really just
an employee of the body shop. Also, ProTip: the bigger the company, like say
fortune 500, if you're truly freelancing/building your own business, hired
directly, it's very common to get paid Net 90 (quarterly).

Edit: I should add, that if you're doing freelance for a small/start-up-
ish/mom-and-pop company, it might be beneficial to get some form of retainer
to do some work if you can negotiate that. Or, just stay away from this type
of work all together if you can, as this is where I found most billing
issues/collections in the past.

~~~
taude
I'd also add, that I probably wouldn't hire a freelancer with a blog article
like this on their site. It shows a lot of immaturity, lack of business
acumen, and experience. Maybe things are different in Australia?

~~~
Tyrannosaurs
That was my immediate response - that 10% per week screams petulant and
immature.

Yes, people paying late is bad, but it's also part of dealing with many large
organisations. In cases I've seen the accounting department don't care what
the local manager might have negotiated or even what the contract says,
they'll pay when their (the accounting department) policy says they'll pay.
They know that most people aren't going to risk their relationship with the
company by charging interest or take legal action over what are relatively
small amounts (next to the legal fees).

~~~
slantyyz
>> That was my immediate response - that 10% per week screams petulant and
immature.

Totally agree that it screams of inexperience, and it's obvious that person
lives hand-to-mouth. I pay my bills on time, and I would never hire that guy.

I always tell people starting contracting that they need about 3 months of
"salary" in the bank, and a main portion of that is for cash flow coverage -
in other words, the time it takes to collect on an invoice.

Having that 3 month float in the bank prevents you from taking every gig that
comes your way. If, say, you're charging $100 an hour, don't take on customers
who aren't used to paying that type of rate. The local business owner who is
paying his staff minimum wage has little appreciation for the work you do.
Chances are extremely good that he/she's going to nickel and dime you at every
turn.

I've never not been paid for any contract work and haven't been negatively
impacted by slow accounting (payment) policies because I always make sure I
have enough of a float that allows me to choose my customers very carefully
and not worry about the occasional late payment. I invoice net 30 and on
longer projects, have a simple condition that I will stop work when an invoice
is 60 days overdue.

If you really want to encourage early payment, then implement something like a
2/10 net 30, which is a 2% discount if the invoice is paid within 10 days.

~~~
jarek
> and it's obvious that person lives hand-to-mouth

Or maybe he just has better things to do than hounding clients to comply with
net 30 or net 90 terms?

I think the disinclination to contract would be mutual in your cases. And
that's just fine.

------
mmcnickle
There are lots of ways to ensure you are paid on time, being wholly
unreasonable is not one of them. The key is to ensure that the invoice doesn't
go overdue. Outline the consequences of late payment (work stoppage, no code
delivery, no handover) at the beginning of the relationship, and work on terms
that both sides are happy with. Tie payments to solid deliverables and send
reminders. Bring hardcopy invoices to signoff meetings; if they don't pay it
there and then, reschedule the signoff.

As an aside, I don't think your abusive penalty would be enforceable (in the
UK anyway).

I would never agree to your terms.

~~~
socksy
If they were in the initial contract, I think it can still hold:

"You can calculate the interest payable on overdue bills by taking the
relevant reference rate and adding 8 per cent.

Alternatively, you can set a contractual rate that may be higher or lower than
the statutory rate. If you set a contractual rate, the statutory rate no
longer applies"

[http://www.businesslink.gov.uk/bdotg/action/detail?itemId=10...](http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1073792170&type=RESOURCES)

~~~
mmcnickle
Interesting. The ability to charge a late fee is guaranteed by the Late
Payment of Commercial Debts (Interest) Act 1998 which sets the statutory rate.
Even though you could set significantly higher rates in your contract, the
client might have remedy under the Unfair Contract Terms Act, where the
supplier would have to show that the late fee is reasonable in relation to the
damages sustained by late payment. Late payment is a breach of contract, so
late fees have to be in line with the actual damages caused by that breach.

------
Chris_Newton
Rather than going after late fees, I’ve found find it quite effective to offer
ongoing clients a modest discount if they pay invoices quickly. For example,
if our normal terms on a contract were 30 days, we might offer a client a
couple of percent off if they paid within a week of the invoice date. This
way, clients are at liberty to wait the full period if they want to, but it
will cost them a little more for the privilege.

That seems to be enough incentive for a lot of places to pay early,
particularly smaller businesses who aren’t on some fixed schedule run by a
central accounts department. That in turn reduces the risk to my company,
because typically we’ve only worked a little over a month before the
corresponding payment reaches the bank, rather than having two full months of
revenue at risk if anything unfortunate happens to the client.

Obviously this is all agreed up-front and terms are always negotiable, and for
some larger companies this sort of scheme doesn’t help because you’re often
looking at a longer payment window anyway. In that case, the basic rule is
that the longer the window they want, the more the basic rate goes up and the
bigger the up-front deposit before we start work.

~~~
slantyyz
Agreed, it's always better to offer an incentive for being good than a
punishment for being bad.

~~~
scarmig
Interestingly enough, that's not always true, at least for teachers. Recent
paper:

[http://papers.nber.org/papers/w18237?utm_campaign=ntw&ut...](http://papers.nber.org/papers/w18237?utm_campaign=ntw&utm_medium=email&utm_source=ntw)

"Domestic attempts to use financial incentives for teachers to increase
student achievement have been ineffective. In this paper, we demonstrate that
exploiting the power of loss aversion—teachers are paid in advance and asked
to give back the money if their students do not improve sufficiently—increases
math test scores between 0.201 (0.076) and 0.398 (0.129) standard deviations.
This is equivalent to increasing teacher quality by more than one standard
deviation. A second treatment arm, identical to the loss aversion treatment
but implemented in the standard fashion, yields smaller and statistically
insignificant results. This suggests it is loss aversion, rather than other
features of the design or population sampled, that leads to the stark
differences between our findings and past research."

------
stevenbrianhall
I have definitely had my share of clients that have been slow to pay, and am
very thankful for having had the majority of my clients pay well and on time.
However, I have had the occasional client that just doesn't want to pay, and I
definitely know the feelings of helplessness and anger that drive the creation
of this sort of policy.

My question about this method is more about practicality than anything else.
Has the OP actually tried to enforce this? It's hard for me to imagine
presenting an invoice for 150% of the original and not have the client fly off
the handle and make things much worse.

~~~
netcan
Yeah, I woud definitely like to see an update on this.

------
anthonyb
Mike Monteiro already did it better: <http://vimeo.com/22053820>

edit: He also covers a lot more ground in terms of negotiating, having a
contract, etc. Well worth the 38:40 to watch.

edit2: There's also a book - Design is a Job - which goes into even more
detail. I have it, it's pretty good.

~~~
moron
I don't have the book but I agree about the video. Well worth watching.

~~~
tmrtn
In that vein, check out zencash.com. It automates all the backend payables
stuff that Monteiro advocates.

------
Swizec
Now that I think about it, I've noticed one peculiar thing. The more popular
my blog is and the more general exposure I get in the tech community around
here, the less problems I have with clients not wanting to pay or delaying
payment.

Interesting how that works.

That said, I have never been able to collect payment upfront because I don't
have a personal business and do things as an individual (there's some
bureaucratic crap that prevents upfront payments for normal authorship
contracts in Slovenia). And I have never not gotten paid completely, it can
just sometimes take a few months longer than I would like.

That that said, circling back to my main marketing vehicle - the blog -
building that has helped me be very picky about the clients I work with, which
lets me avoid a lot of the problems.

------
alan_cx
Based on the most lazy of research sessions, I'd probably just sell the debt
to a debt collector, and accept the minor cost which appears to be around 10%,
rather than go though all the time wasting grief of doing it myself. One,
programming time is worth a lot more than debt chasing time. Two, the
emotional side some people feel when chasing debt can impact on the
programming (whatever), and personal time. I don't work or function that well
when I am all annoyed about something. Better to have the 90% and move swiftly
on. Let some one else who job it is deal with it.

I suppose, it a personal decision, depending on what we are prepared to do and
accept. Some people may be quite happy to chill out and wait, some need the
money asap.

~~~
eli
I guess it depends on a lot of factors, but the collections agencies I've
worked with take a _lot_ more than 10%. But you pay nothing if they are unable
to collect. So if you were ready to give up on a client and write off the debt
anyway, there's little to lose.

At my old company, we hired a stern-voiced hourly contractor to call clients
with outstanding debts. She much more than paid for herself. Some invoices she
couldn't collect on we sent to an agency, but honestly at that point they were
quite old and the agency had a pretty low success rate.

------
Nate75Sanders
What happens if the author of the post is late delivering his work?

I'd like to see his full contract.

If anybody knows of "really good" rather than just "reasonable" contracts for
programming contract work (perhaps involving retention of copyright/similar if
client doesn't pay in a timely fashion), I'd love to see them. Please link.

~~~
pfranz
If he is late on delivering, I'm sure he would be in close communication with
the client on the adjusted delivery date. This isn't the case for late
payments.

~~~
a-priori
He also wouldn't be sending a final invoice until the work is complete, I
assume.

~~~
slantyyz
Unless they invoice at fixed time periods, like bi-weekly or monthly.

------
skyhook_mockups
I recently had a non-paying web hosting customer. 3 Months without payment for
multiple sites. Finally after numerous warnings I replaced her sites with a
'this account has been suspended' notice.

Received payment that day.

Kill switches work wonders.

~~~
shawabawa3
That's not exactly a kill switch. If you're hosting the web site then of
course you can deactivate it if they don't pay.

I think he was talking about delivering a finished software product to be run
on their hardware, but that has a backdoor that allows you to access and
deactivate it remotely.

~~~
eshvk
I am curious how this would work legally. Once you have delivered the product,
is killing it remotely equivalent to maliciously breaking in and destroying
property?

------
jeffdavis
That seems overly adversarial. 10% per week is punitive; not representing any
real cost.

What you should do is charge enough up-front (as a fraction of the invoice or
a flat number) and bill frequently enough that a client stringing you along
for a bill doesn't really hurt you.

You should also have a few clients going at once so that a few weeks late
doesn't mean a few weeks of lost work, because at the first sign of a late
payment you switch to other clients.

And for your regular clients, especially ones that have trouble paying quickly
(perhaps due to corporate policies), ask for a retainer so you can keep their
projects at a high priority without sticking your neck out.

Professionalism and respect go in both directions. Even large companies don't
necessarily have a team of people dedicated to paying your bills
instantaneously. If it's a good relationship and they value the project and
you make it known that prompt payment is necessary to meet the schedule, they
will pay promptly. If not, then no amount of punitive late fees will change
that.

------
redslazer
A couple of things:

With your system the longer the client doesn't pay the invoice the less likely
he is to pay at all. Why is this a good system?

Are you going to write a blog post regarding your opinion on kill switches? I
would be interested to read that :)

Why is your CSS in the head of each page rather than a separate file?

You rolled your own blogging platform because you think wordpress, drupal or
joomla are over the top. Your website is using drupal, wouldnt it be less
effort to just use a drupal blogging module rather than have a separate
system?

------
boralben
I disagree with this post. The author is setting himself up for a bad
reputation. Those unhappy customers that pay exorbitant fees will make it
their business to tell others to avoid using the author.

Late-paying customers are just part of business.

------
stcredzero
_> Some people think that building a "kill-switch" into their code is a way to
ensure prompt payment (I don't; I think it's a horrible idea, but subject
matter for another blog, at another time)._

Such practices are flat-out illegal in some jurisdictions.

~~~
rmc
oh? How so? Surely you have no right to use software/work if you haven't paid
for it?

~~~
stcredzero
There are some jurisdictions that protect software that's running in
production. In the case of industrial control software, there can be serious
safety considerations to shutting down software. I know this from a previous
job with a vendor that constantly had licensing disputes with industrial
customers.

I may not be remembering this correctly, but I think Canada is one such
jurisdiction.

------
veidr
I'm sympathetic to the idea that requiring prompt payment for work done is a
reasonable thing. But ten days doesn't work in (most of) the real world.

For many people in a position of hiring contractors to do work, there are
times when an invoice can sit in an inbox -- physical or otherwise -- for more
time than that before even being opened, much less acted upon via a process
that often involves multiple other people.

Most companies I've experienced would respond to a demand for a 50% late fee
by paying the exactly the original amount, exactly 30 days after invoice, and
simply never work with you again.

~~~
Argorak
He says right on top that thats negotiable _upfront_. I usually have net 15
and am pretty strict on that. That means, I will call on that day and ask for
the invoice to be paid. I also make it clear to clients that prolonged non-
payment outside of terms will lead to a raise on the negotiation. I also make
clear that if they cannot pay for whatever reason, they can just call and talk
about things. The reason why the default number is low is pretty easy: clients
will only go up from there.

I personally find the punishment extremely hard. 10% per week is definitely
unreasonable. It would basically put that person on my "don't recommend that
colleague"-list.

About companies not paying late fees: unless the contract is really beefy to
start with, its also a quick way to ensure that good freelancers won't work
with you again. Word goes around. I've seen more that one seemingly "big"
company struggle with not having any business partners to turn to any more.

------
filip01
This can't be legal in many places. Also, you'll come across as not very
professional when trying to charge 150% interest on a month late invoice. Will
seem like a scam to many. Surprised this made it to the front page. Imagine it
was BofA forcing these terms on a mortgage for a family.

------
timjahn
I definitely ran into clients like this more than few times when I did
freelance development.

I even once had a small restaurant owner ask for $750 back (after work had
been performed) because his refrigerator broke and he needed money for
repairs.

The types of clients who won't pay are generally not worth working with, and
it takes time/experience to spot them before signing to work with them.

"Just pay me" is one of the reasons we're starting matchist (matchist.com): no
more problem clients for quality developers.

------
vbtemp
Just out of curiosity, why does the author think that "kill switches" are a
bad idea? Comcast will cut my internet connection if I don't pay the bill, so
will other utilities...

~~~
Spooky23
Would you trust someone who put a time-bomb in your business system?

That stuff is immature and unnecessary. You handle non-payment issue through
the courts, not with vigilante justice. Have a lawyer draw up your contracts,
and don't transfer ownership of the intellectual property until payment is
made. If they don't pay, sue them for using _your_ property.

------
daemon13
Although this might fly with some SMBs, this is not how multinational
companies work.

In a typical multinational company there is an annual DPO (Days Payables
Outstanding) goal, that shall be achieved no matter what. So unless a vendor
has monopoly or has unique product/service, such approach will not fly [unless
all such vendors have the same terms].

So if all software developers are using 30 days or 60 days terms, 10 days will
not fly.

Until then, I would recommend a more constructive approach - use factoring.
Don't know the cost in US, but certainly less than 10%. Increase your price by
the factoring charge. Note that this might require you to update your contract
and include right to re-assignment [check with legal person].

------
orthecreedence
When our clients didn't pay us, we stopped all work on that project until we
had their money in our bank account. That's really the best incentive: send
out invoices once a month, and stop work on whoever doesn't pay you. People
don't want to see all that money they paid go down the toilet. Getting 10-20%
up front eradicates situations where people who don't want to send you the
last payment for a finished project.

There's also nothing wrong with actually paying them a visit and politely
demanding your money (only if they're in town of course). This can make you
seem a bit more like you actually exist and you're not some piece of paper
asking for money.

~~~
bbwharris
This is really the most professional solution in my opinion. Once payment is
past due, then all work stops. If you have been consulting for a while, you
can easily change gears and focus on something else.

------
rglover
Great article. I think the one hook in here for me was: _This is about being a
professional, and being treated as a professional._

One of the big things that has helped me is to include a clause in my contract
that says "I'll deliver code when final payment is received." This mitigates a
lot of trouble and usually helps to secure payment a lot quicker. The only
caveat on this is that for client's whom I've developed a relationship with, I
tend to ship code before final payment with a net fifteen window on the
invoice.

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jakejake
10 day payment terms is not compatible with my experience of freelancing for
small & medium sized businesses. With corporate or government clients that
amount is just not even realistic at all. 30 days is fairly standard. 45 or
even 90 days is not unrealistic for larger contracts.

I also think that 10% per week late fee - though I certainly understand and
sympathize with a freelancers grief - it gives me a somewhat unprofessional
impression of a freelancer who is either not financially stable or just
vindictive. When I hire somebody I like to feel that they will be around next
month. A more friendly approach with long-term benefit is to just stop working
with clients who don't pay on time.

To make your life more stable as a freelancer I can say from experience that
you want to obtain repeat clients as soon as possible - clients who want you
to work on either retainer, or at least agree to some minimum amount of hours
per month. Over time get rid of clients that don't pay on time or are
problematic in other ways. Once you get past that point freelancing can be a
really enjoyable and profitable to earn a living. Until you get there, though,
you can tend to spend a decent amount of time haggling and arguing about money
with your clients.

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samuellevy
Well. This has generated quite a conversation (both here, and on the blog
post). I suppose I better clear the air, a clean up a few misconceptions. The
following is pretty much a cross-post from the comments there:

1\. The default terms are exactly that. Default terms. They will be discussed
with clients before a project starts, and we will negotiate terms that suit us
both. Think of it like asking for all the brown M&Ms being removed from a
rockstar's rider. If a client is unwilling to discuss terms with me or
unwilling to negotiate for their project, then either the project will proceed
with these terms, or I may refuse the project entirely.

2\. The actual wording allows me to implement the penalty at my discretion.
I've had a couple of late payers, and often just the mention of the penalty
will prompt them to pay. I'm not trying to destroy client relationships here -
I just want to get paid.

3\. A penalty for late payment isn't the only protection; that would just be
stupid. Aside from contracts, I am very willing to refuse working for clients
who I don't trust to pay on time.

4\. This isn't something that I will just spring on a client at the invoicing
stage. Yes, it's copy on my invoices, but that's there to remind clients of
the agreement.

5\. Negotiation is important. I realise that this is a re-hash of point 1, but
it bares saying twice. I have contracts with different clients where different
terms are enforced. The point is that these are default terms, which are there
to protect me and my business. They are my starting point for negotiation. So
long as you don't come at me offering "I promise to pay you on time" as a
point to negotiate with (you can't negotiate with promises that you should be
keeping anyway), then we'll figure out better terms for both of us.

~~~
kitsune_
So how much of your actual income is covered by contracts that fall under your
"default terms"? And what part is covered by individual contracts?

~~~
samuellevy
In the time I've been working freelance (admittedly, not particularly long),
I've had only one client who didn't want to negotiate a better contract, and
that's because the work was "emergency" work (things on their site were
broken, and they needed someone to step in and fix them so their business
could continue). I made them aware of the conditions, and they accepted them.

Everyone else (who I've actually done work for since I implemented this) has
wanted to negotiate a better contract. I've turned down people who refused to
look at the contract, because I feel that they're probably not going to pay
sufficient attention to the project, and I would have to fight them to get
payment.

This isn't about trying to make big bucks on late fees - after a certain
amount of time, I would write it off as a bad debt (as such) and hand it on to
a collection agency, or call in the lawyers.

------
medinismo
In my humble opinion, I think most these comments miss the root problem which
is getting paid for the work. I know I am not supposed to plug own companies,
but since we have been dealing with this very issue at the platform and
process level, I will chime in with what we know. We decided that the way to
go was pre-payment - ie work only begins when funds are in hand. The next
questions is how to break down the chunk of work to make it easy for a project
owner to pay and yet meaningful enough to the developer. We settled on a
week's worth of time. Ie a developer in GroupTalent can submit a "sprint" of a
week's duration working as many hours a developer would like to work in that
week (most settle around 20-30hrs).

I am personally exploring a new twist in this process with the ability to
force customer requirements into user stories and let developers charge for
implementing a number of these stories in the same prepayment model.

hope this helps

------
markokocic
If you are in a position to dictate this NET 10 or late fees conditions, then
by all means, go for it. Work has to be paid. This can work well in markets
where it works in your advantage. The only problems is that in many markets on
can't enforce such rules, because there are many providers to the same service
driving price and terms down.

------
kljensen
I assume you're doing "work for hire", which implies that your copyright is
assigned to the client in consideration for your wages. In your agreement, you
could explicitly specifiy, absent payment in full, the copyright remains with
you. (This is may be the case anyway.) That is, they don't own it without
paying for it.

------
exolab
I would never work with anyone who even proposes such terms. Not because I
don't want to pay on time (we always do) but because those terms are
unprofessional, to put it mildly. If you want to be treated like a pro, act
like one.

Update: Having looked at your resumé, I probably wouldn't work with you
anyway.

------
recycleme
When I was freelance I was lucky enough to get paid on time. Every time. I
attribute it to the communication I had with the client. I would speak or
email the client everyday I was working on their project. When it came time to
invoice them I would simply send out an email.

Communicate often. It helps.

------
codegeek
I freelance and bill my clients and get paid Net 30. The issue of late or non
payment is not that easy to resolve just by slapping late fees etc. It really
depends on many factors including your clients ability to pay on time
(sometimes they depend on payment from someone else to pay them before they
pay you), how big they are etc etc. My current client was late by about a week
on my last payment and his reason was "my bank screwed up". I think either you
go through a detailed contract listing every possible screw-up that could
happen but most likely, late payments will happen here and there.

------
hxa7241
The basic problem is a power imbalance, and its result is that _they_ tell
_you_ how they pay. So any proposed solution built on the idea of _you_
telling _them_ how to pay seems very much in danger of failing for exactly the
same reason that there is a problem in the first place.

(Perhaps the main avenue to a solution is in freelancers acting collectively
somehow -- thereby becoming more powerful. If clients risk being unable to
find service-providers because those clients have been blacklisted, they would
more strongly feel the value in paying-up.)

------
swdunlop
I whole-heartedly agree with the terms, if not quite the tone. I've had to
chase companies that had the cash to waste visibly for late payment. I've had
to chase companies that wanted to change terms after there was acquisition
interest. In both cases, I had to waste time chasing them down and I feel that
the usual "net 30" scheme was to blame. The companies see the 30 days as a way
to procrastinate after the purchase and the opportunity for a situation change
to make things weird creeps in.

------
awolf
>10% per week, every week, starting from the first day that the invoice is
overdue.

I'm pretty sure that's much much more than the maximum rate permitted by law.

------
tmrtn
Dude, stop with the late fees and go check out www.zencash.com. It was built
exactly for this purpose. Get a better receivables plan. ZC connects to your
invoicing app and will send reminders on your behalf, or if you're really done
with that customer, send the bill to collections.

It's not worth the stress, trust me, I've been there. Full disclosure: I just
joined the team as DoP.

------
dohertyjf
LOL love the doormat remark. It's so true. I think your payment system markup
makes a lot of sense. People often do not fully appreciate that a lot of us do
freelance for needed extra money, so their withholding of payment is actually
pretty problematic for many of us. As long as your markup policy is written
into the contract, I think your process is brilliant.

------
runako
Check the Mike Monteiro linked in another comment. Professionals use lawyers,
not amateur contract terms, to get paid.

~~~
tmrtn
'zactly.

------
huhtenberg
Gotta ask - how often does it come to this for you and do you actually manage
to collect these penalties?

------
hammock
The way that most businesses and professionals outside the tech industry
actually deal with this is quite simple, and quite uniform. Two percent (or
thereabout) discount for immediate cash payment.

For example, 2/10 net 30 means 2% discount if paid within 10 days, otherwise
full amount due in 30.

------
dedward
That could work - I'd be tempted to put a limit on it though - a 10% penalty
(or whatever) immediately upon overdue, and a cutoff point where you simply
send them to a collection agency.

Of course, in the end, you put what the law allows and your clients will
accept....

------
chrisbennet
When I contracted, my rule was to never lend the client more than 10 days pay.
My clients didn't seem to have a problem with that - even a big multinational.

If your clients can't get their act together in 10 days offered to work on
retainer.

------
oxwrist
Similar (but more entertaining): Fuck You, Pay Me <http://vimeo.com/22053820>

------
valdiorn
10% a week interest is forbidden, by law, in my country.

------
logical42
you should probably stop free-lancing.

