Ask HN: As a freelancer how concerned are you about how fast you get paid?
26 comments
1) I have indivualized this. Before even writing the invoice I will have a long and sup-friendly chat over coffee with the accounting person or whoever takes care of thee billing in that shop. I let them explain in detail their process. I always learn something interesting about how the real world works. I listen. I listen to their woes, I sincerely try to understand them, their problems act everything. I establish rapport with that person. Finally I ask: "OK, now, how are we going to go about this?" At this point I normally have enough of an idea about their process to understand what kind of dates and other terms would make it work. I always highlight mutual respect.
2) First of all, normally I do not start to work before I received the money upfront. Well, the money for the current milestone of the project. This is the best way to make sure you don't waste time with people who don't want to pay.
Second, I am not only willing to give a discount, I always use this to sell the offer I want them to buy the most. But I never do an unreal number like "2%". What is that? Have you ever seen a 2% running in the wild? I don't know any bank or corporate office that work so fast that they give you the money on the sam day. Unless you are talking about "small" clients who work via pay-pal and the like?
3) I don't understand the question?
2) First of all, normally I do not start to work before I received the money upfront. Well, the money for the current milestone of the project. This is the best way to make sure you don't waste time with people who don't want to pay.
Second, I am not only willing to give a discount, I always use this to sell the offer I want them to buy the most. But I never do an unreal number like "2%". What is that? Have you ever seen a 2% running in the wild? I don't know any bank or corporate office that work so fast that they give you the money on the sam day. Unless you are talking about "small" clients who work via pay-pal and the like?
3) I don't understand the question?
Re 3) - Assuming at any one time there are two different clients with who you can work - the projects will pay the same, will take a similar amount of time etc. But you know one client will take say a month to pay, the other one a couple days after you submit your invoice.
Of course based on your answer with 2, I see it wouldn't really apply if you just take your payments upfront ... :)
Of course based on your answer with 2, I see it wouldn't really apply if you just take your payments upfront ... :)
For perspective: I started doing contract CAD work in 1990. I started doing freelance residential and commercial design in 2002. I started practicing architecture in 2007. The tl;dr: If I have doubts about a potential client paying quickly or at all I will validate that doubt by requiring a check rather than just hoping I am wrong.
Typically, I require a substantial retainer to be applied against final invoice. By substantial, I mean big enough to cover all the billings up to payment of the first invoice. Payment terms are always "Due on receipt of invoice." I am not in the no-interest short term unsecured loan business. This means:
1. I will not be upside down where I am owed money for work I have done.
2. I will not discover that the client does not have funds to pay me.
3. I will avoid potential clients with a strong propensity not to pay without investing much time.
4. I will avoid potential clients who will use me as a bank.
5. I will avoid potential clients who believe that since they did not build it, they should not have to pay.
The most significant characteristic of a good client is that they pay quickly and well. Here, "well" can mean a lot or regularly, but preferably both. Writing a check before we start is a good indicator.
There are exceptions of course. Bureaucratic organizations have their payment procedures. On the other hand, if the person who I am talking to cannot authorize a retainer, then I might not be talking to the right decision maker about the financial aspects of the contract.
Good luck.
Typically, I require a substantial retainer to be applied against final invoice. By substantial, I mean big enough to cover all the billings up to payment of the first invoice. Payment terms are always "Due on receipt of invoice." I am not in the no-interest short term unsecured loan business. This means:
1. I will not be upside down where I am owed money for work I have done.
2. I will not discover that the client does not have funds to pay me.
3. I will avoid potential clients with a strong propensity not to pay without investing much time.
4. I will avoid potential clients who will use me as a bank.
5. I will avoid potential clients who believe that since they did not build it, they should not have to pay.
The most significant characteristic of a good client is that they pay quickly and well. Here, "well" can mean a lot or regularly, but preferably both. Writing a check before we start is a good indicator.
There are exceptions of course. Bureaucratic organizations have their payment procedures. On the other hand, if the person who I am talking to cannot authorize a retainer, then I might not be talking to the right decision maker about the financial aspects of the contract.
Good luck.
Fair enough, thanks for the feedback Ben, appreciate it.
1) I try to have slightly weird terms so that I don't slot neatly into any standard way of ignoring invoices.
2) Yes, in principle, though (a) it complicated taxes and (b) none have ever taken me up on the offer. You could go to a factor to do it for you though.
3) Unless it's a huge difference, no.
When I started at RBS in 2008, having escaped Lehman Brothers just in time, I was glad that I had been switched to weekly invoicing (without being asked) since RBS' share price halved live while I watched in the first week and I wasn't sure that RBS would be alive to pay me in week 2!
2) Yes, in principle, though (a) it complicated taxes and (b) none have ever taken me up on the offer. You could go to a factor to do it for you though.
3) Unless it's a huge difference, no.
When I started at RBS in 2008, having escaped Lehman Brothers just in time, I was glad that I had been switched to weekly invoicing (without being asked) since RBS' share price halved live while I watched in the first week and I wasn't sure that RBS would be alive to pay me in week 2!
1) Weird how? Any examples?
2) Have you ever used factoring services before? What was the experience like?
2) Have you ever used factoring services before? What was the experience like?
1) 21 days or 8 days or 17 days. NOT 30 days or a multiple thereof.
2) No, though I have been tempted occasionally. In one case the accounts dept was sympathetic with me over their MD being slow every invoice signing off, so I'd go and have tea with them for an hour each Friday afternoon and book it as paid time "OH:Admin". We reckoned that that easily covered any interest costs to me, and made Friday so much better!
2) No, though I have been tempted occasionally. In one case the accounts dept was sympathetic with me over their MD being slow every invoice signing off, so I'd go and have tea with them for an hour each Friday afternoon and book it as paid time "OH:Admin". We reckoned that that easily covered any interest costs to me, and made Friday so much better!
Have you found any change in how people pay the invoices after you started doing the nonstandard days?
I generally end up getting to know the relevant people in accounts when they ask me "Uh, what do we do with this?" and talk to them and build enough of a relationship that payments are made as well as they can be. (Or else, in some spectacular cases, an accounts person being stupid to me gets fired.)
1) 30 days.
2) Probably
3) Always, clients who pay on or before time get priority all other things been equal, cashflow trumps pretty much everything else.
If I have more clients than I have time then the clients who get dropped of the list are the ones who pay late, I've done the work I shouldn't have to chase you for the money.
I just took a full time job though as freelancing is way too much not-programming and I 'just' want to be a programmer for as much of the day as possible.
2) Probably
3) Always, clients who pay on or before time get priority all other things been equal, cashflow trumps pretty much everything else.
If I have more clients than I have time then the clients who get dropped of the list are the ones who pay late, I've done the work I shouldn't have to chase you for the money.
I just took a full time job though as freelancing is way too much not-programming and I 'just' want to be a programmer for as much of the day as possible.
1), 2) - so if they offered to pay same day, how much would you be willing to knock off? 5%, 10%, more?
3) Were invoice related things the primary time drain that took you away from dev work, or was it a combination of everything - marketing yourself, interacting with clients etc ... ?
3) Were invoice related things the primary time drain that took you away from dev work, or was it a combination of everything - marketing yourself, interacting with clients etc ... ?
Probably 5% I don't think I'd go to 10% as that would be a fairly big hit.
Invoice related things were not the primary time drain since I paid the accountant to chase invoices however late invoices where a major concern because underlying cash flow is what makes or breaks you.
The other thing that becomes an issue is the classic "project management" issue, doesn't matter how good your process is if the people on the other side simply don't get it and that causes a lot of problems (projects stall because you can't get the data/information you need), fixed deadlines loom close and you are stalled waiting for information.
In the end if you care about producing high quality work it's incredibly stressful and frankly after 4 years I'm sick of it, I'm really looking forwards to working on internal systems for a big company, replacing "every client is a boss" with "this is your boss" sounds lovely to me.
Invoice related things were not the primary time drain since I paid the accountant to chase invoices however late invoices where a major concern because underlying cash flow is what makes or breaks you.
The other thing that becomes an issue is the classic "project management" issue, doesn't matter how good your process is if the people on the other side simply don't get it and that causes a lot of problems (projects stall because you can't get the data/information you need), fixed deadlines loom close and you are stalled waiting for information.
In the end if you care about producing high quality work it's incredibly stressful and frankly after 4 years I'm sick of it, I'm really looking forwards to working on internal systems for a big company, replacing "every client is a boss" with "this is your boss" sounds lovely to me.
Hypothetically speaking, if you didn't have to spend money on the accountant, and if your invoice was paid immediately 100% of the time, would that get you closer to be willing to give up up to 10%?
Theoretically yes a lot closer but solving the problem of small/medium businesses paying freelancers/contractors on time isn't a simple problem.
Cheers, thanks for the feedback :)
1. Payment is due on receipt of invoice
2. I give a 10% discount for invoices paid on the same day as receipt
3. I will not do repeat work for someone who did not pay on time
2. I give a 10% discount for invoices paid on the same day as receipt
3. I will not do repeat work for someone who did not pay on time
1) Have you run into any issues with bigger companies with it being due on receipt? - While it's ideal, most companies would have their own fortnightly or monthly payment cycles no?
2) Is the cashflow that much of a factor, or do you up your original invoice by 10% just to cover that possibility without taking a hit?
3) So if they pay you say within 2 weeks, would you not want to do repeat business?
2) Is the cashflow that much of a factor, or do you up your original invoice by 10% just to cover that possibility without taking a hit?
3) So if they pay you say within 2 weeks, would you not want to do repeat business?
1) 7 days
2) nope
3) i do the work on you terms, you pay me on my terms. ( im not cheap, minimum is $80 an hour)
Have you run into any issues where you would want to work with an otherwise good client, but they would only be able to pay on net 30?
I will never work for 30.
Gotcha, thanks for the feedback. :)
I don't think he understood the question. "For 30" sounds like he meant "$30 per hour" and not "on net 30 terms."
1) net immediate but invoice is sent on the first of every month
2) 10% discount if paid on same day and any (Paypal) fees removed
3) I document my work and send an invoice to the client - I expect payment within a week and would prefer those clients who see the work is done and want to pay their bill immediately
When I send an invoice, I usually put payment due upon receipt, however, for clients that I do daily work for or updates once a month, I only send an invoice once a month.
I've never had issues with clients paying because I have showed them purposely what happens when I don't update their websites... they actually crash after a while. WordPress is great, and will almost always work to an extent even when outdated, but massive plugins that are database intensive and rely on user input usually start failing after a few months of not being updated.
So yeah, if they don't pay, I don't update their website, and it starts to break, and by that time, I usually charge them more to figure out what went wrong, and they learn that paying my invoices on time, will save them money in the long run.
I have only ran into a problem once.. a client forgot to pay me and I let it slide for the entire month. I sent her an email reminding her that she had not paid the invoice and if she would like to continue my services to please pay her invoice. She paid within 24 hours.
I also usually offer my clients two options:
1) pay me hourly and be sent an invoice every month
2) pay me yearly and receive a huge discount
So for example, if I build a website for someone, on the invoice, I display separate monthly maintenance pricing and per hour, it might be $30/hr, while paying me yearly might only cost them $1000 for the entire year.
So what are the benefits and disadvantages?
Charging hourly is for clients you know who are going to demand your time and are picky and sometimes want custom work. You can determine how they are going to be when building their website. They will nitpick and probably argue with you more often than you'd like. These clients will milk you for your time when they can, getting you on phone calls, emailing you, wanting to know everything, asking so many questions, etc., so best not to even offer the other option.
Charging yearly is for clients you know who might call upon you once or twice a month, but pretty much you are just providing some support and maintenance. This is for clients who are much more laid back and less demanding. It is best to offer this plan and the other one.
I've had a few clients pay me yearly and most of the time, I haven't really had a loss. For some, I may have done a little more work than I would have liked, but it is also the gamble I take when offering clients those options.
On the bright note of being paid yearly, you get paid immediately upfront so you see the money right away, but you risk your client needing more work and you end up getting paid less than if you had charged hourly. You obviously can't take this back. So it is good to know your clients well and their demands before offering such an option.
The bonus is that if they don't use your services that much.. you made some good money for doing very little work, sometimes no work at all, if they don't call upon you for the entire year. Easy money.
2) 10% discount if paid on same day and any (Paypal) fees removed
3) I document my work and send an invoice to the client - I expect payment within a week and would prefer those clients who see the work is done and want to pay their bill immediately
When I send an invoice, I usually put payment due upon receipt, however, for clients that I do daily work for or updates once a month, I only send an invoice once a month.
I've never had issues with clients paying because I have showed them purposely what happens when I don't update their websites... they actually crash after a while. WordPress is great, and will almost always work to an extent even when outdated, but massive plugins that are database intensive and rely on user input usually start failing after a few months of not being updated.
So yeah, if they don't pay, I don't update their website, and it starts to break, and by that time, I usually charge them more to figure out what went wrong, and they learn that paying my invoices on time, will save them money in the long run.
I have only ran into a problem once.. a client forgot to pay me and I let it slide for the entire month. I sent her an email reminding her that she had not paid the invoice and if she would like to continue my services to please pay her invoice. She paid within 24 hours.
I also usually offer my clients two options:
1) pay me hourly and be sent an invoice every month
2) pay me yearly and receive a huge discount
So for example, if I build a website for someone, on the invoice, I display separate monthly maintenance pricing and per hour, it might be $30/hr, while paying me yearly might only cost them $1000 for the entire year.
So what are the benefits and disadvantages?
Charging hourly is for clients you know who are going to demand your time and are picky and sometimes want custom work. You can determine how they are going to be when building their website. They will nitpick and probably argue with you more often than you'd like. These clients will milk you for your time when they can, getting you on phone calls, emailing you, wanting to know everything, asking so many questions, etc., so best not to even offer the other option.
Charging yearly is for clients you know who might call upon you once or twice a month, but pretty much you are just providing some support and maintenance. This is for clients who are much more laid back and less demanding. It is best to offer this plan and the other one.
I've had a few clients pay me yearly and most of the time, I haven't really had a loss. For some, I may have done a little more work than I would have liked, but it is also the gamble I take when offering clients those options.
On the bright note of being paid yearly, you get paid immediately upfront so you see the money right away, but you risk your client needing more work and you end up getting paid less than if you had charged hourly. You obviously can't take this back. So it is good to know your clients well and their demands before offering such an option.
The bonus is that if they don't use your services that much.. you made some good money for doing very little work, sometimes no work at all, if they don't call upon you for the entire year. Easy money.
1) Were there any clashes with their own payment cycles? - e.g you send out the invoice on first of month, expecting immediate payment, but their own cycle pays out all outstanding invoices at the end of the month?
3) With the yearly payments, is there any clause e.g. you get upto 50 hours of work, after that it's hourly rate' or the like to prevent abuse?
3) With the yearly payments, is there any clause e.g. you get upto 50 hours of work, after that it's hourly rate' or the like to prevent abuse?
1) For one client who runs a business she sometimes takes a week to pay it. I don't think I've ever had trouble with a client paying except that one I mention.. she got busy and didn't see my invoice email but once I sent a reminder it was paid immediately.
2) I probably should do that but like I said you feel the client out and their needs. I have had to go back to a client and raise the amount I was charging telling them I had to be fair with my pricing and due to their needs was increasing it.. it was only about $300 or so.
Once I made the mistake of charging $500 to a client to do her website and she nitpicked everything to the point where it is now almost 4 years later and the website still has not gone live. I obviously made no money on it, but after reaching out several times, I can't even get a hold of her. I charged that little as a favor to my brother, who recommended her to me, and because she was looking for a "cheap" website -- this was a red flag. She runs a million dollar business but did not want to invest in her website, but wanted to nitpick like she paid thousands of dollars for one. So yeah.. it took me almost a year to get money from her... and when she paid.. she nitpicked even more and the website never even went live.
I always say to my clients: "if you are fair with me I will be fair with you." This statement here seems to make people understand that I am human trying to make a living just as they are. I'm not trying to rip anyone off or anything considering my client base is usually small business owners trying to make it as well.
2) I probably should do that but like I said you feel the client out and their needs. I have had to go back to a client and raise the amount I was charging telling them I had to be fair with my pricing and due to their needs was increasing it.. it was only about $300 or so.
Once I made the mistake of charging $500 to a client to do her website and she nitpicked everything to the point where it is now almost 4 years later and the website still has not gone live. I obviously made no money on it, but after reaching out several times, I can't even get a hold of her. I charged that little as a favor to my brother, who recommended her to me, and because she was looking for a "cheap" website -- this was a red flag. She runs a million dollar business but did not want to invest in her website, but wanted to nitpick like she paid thousands of dollars for one. So yeah.. it took me almost a year to get money from her... and when she paid.. she nitpicked even more and the website never even went live.
I always say to my clients: "if you are fair with me I will be fair with you." This statement here seems to make people understand that I am human trying to make a living just as they are. I'm not trying to rip anyone off or anything considering my client base is usually small business owners trying to make it as well.
Gotcha, thanks Matt :)
1) When you submit your invoices, what are your typical payment terms - net 30, 60, 90 etc
2) Would you be willing to give your client a small discount (e.g. 2-3%) in exchange for the invoice being paid immediately, so you have the money in your account same day.
3) If you have to choose between clients, assuming all else is equal, are you more likely to work with the client who will pay you faster.