7 Ways for Freelancers to Avoid Getting Stiffed for Payments

It’s the seventh circle of hell for freelancers of all experience levels: getting shafted for pay by a deadbeat client.

The best way to drill any lesson into your head is to learn by experience…

…but I honestly feel like many freelancers can avoid the headaches of payment problems if they follow a system to secure their finances, and don’t just rely on their gut.

What steps can you take to avoid these nightmarish situations?

Today, you’re going to find out! 🙂

1.) Always Investigate Your Client

No, you don’t have to get out the camouflage gear and binoculars, but you should at least do some stalking on your potential clients, because you can never know too much about who wants to pay you.

As someone who’s worked with many early-stage startups, I try not to be too critical on judging new businesses, but generally speaking the longer they’ve been around, the better.

Some other things you should be looking for:

  1. How “public” are they? (Any founders or big personalities active on social media?)
  2. What do customers say about them?
  3. Have they been featured in any respectable publications?
  4. Is it easy to get a hold of people who work there?
  5. How willing are they to answer your questions?
  6. Are their biggest concerns about your work related to price? (This is a big red flag)

The important thing to remember here is to not be afraid of asking questions, even if you have to go as far as asking for a reference from a previous client (I’ve done that before!).

2.) NO. FREE. SAMPLES!

Look, I understand that when you are just getting started with freelancing that it CAN be a plus to do some free work to land your first client, but if you’ve been established for any amount of time, I can’t repeat this enough: no free samples… EVER!

Do you know what kind of clients ask for free samples?

Cheapskates.

Clients who appreciate the work you do will take the time to check out some of your previous work, and they’ll be able to judge your abilities for their desired task from your public portfolio. (You do have one, right?)

Anyone who wants a free sample for their specific project isn’t really looking to see what you can do, they’re look for free work.

I’ll rest my case with a final tidbit from The Joker:

If you’re good at something, never do it for free.

3.) Raise Your Prices

In a weird way, this almost seems like bad advice, but I assure you from years of experience (and from talking with many other established freelancers), it’s one of the best tactics for avoiding deadbeat clients.

I could describe 100 reasons why, but the gist of it is this: bottom-dollar prices attract bottom of the barrel clients.

Not only does raising your freelance rates give you the opportunity to work on less projects for higher pay, you’ll also have the added benefit of only courting people who are willing to pay premium money.

These sorts of customers view your work as an “investment” above all else, and if the value you bring to them is worthwhile, they aren’t going to haggle with you on price.

Make sure you aren’t setting prices that will allow clients to undervalue your work; if you’re a hard worker and talented at what you do, charge like it.

4.) Keep Your Cool

This is one that gets newbie freelancers all the time: you’ve just landed a new client, they say that your prices/deadlines look great and they’re ready to get started.

One problem though…

“This is a fast-paced project! We’ll write up the contract shortly, but if you could just get started on the first 3 tasks, that’d be great!”

Negative!

Unless you have plenty of evidence that this client is 100% trustworthy, do not fall for this nonsense. If getting the contract written up is something they are supposed to complete, then it’s their problem, you shouldn’t have to start working for free before you have a GUARANTEE that you are going to get paid.

I’ll admit, I have some very relaxed terms with a few of my clients, but it’s because the trust has been there for a while and they’ve never let me down before.

When it comes to new clients though, get it in writing and don’t do a lick of work before you do.

Speaking of which…

5.) Leave a Paper Trail

If you don’t think you need a written contract for a client that you’ve never worked with, think about it this way…

Without a written contract, your client has no legal obligation to pay you. At all.

That means that if they decide to drop you from the project or just aren’t in the mood to pay you this decade, you have the options of:

  1. Doing nothing
  2. Whining about it on Twitter

Seriously, you have no legal way to acquire the money that you are owed without some sort of “paper” (digital or physical) trail that connects your client to you. Emails will often not suffice because most of the time, terms are not negotiated down to the specifics over email.

You’re currently on a website that offers beautiful proposal software for new client projects, so there’s your first step. Don’t be afraid to take things much further though: get the specifics of the project down in writing, answering the myriad of questions that pertain to your services (when/how you will be paid, do you retain rights to the work, what deadlines must be made, etc.)

Don’t get burned just because you were too timid (or too lazy) to do a little extra paperwork.

6.) Require an Advance / “If-then” Plan

One of the safest ways to assure that you get paid for the work you do is to schedule a payment plan for certain project milestones, including an advance for when you first begin your work.

For a great example of how you can do this, check out this free eBook social media proposals. It lays out how you can create a project schedule and what you can include in the schedule to get the most security out of your proposals and contracts.

This way, if things go bad, you’ll have been paid for whatever work has already been completed, and the money will be sitting in your account.

Another fantastic way to bulletproof your contract is through “if-then” plans.

The process is simple: set up outcomes (that the client must agree to) in your contract in the form of these “if-then” plans. An example would be something like, “If a payment is made late, then I will halt work until it is completed.”

Some of these specifics that you come up with may seem too obvious, but the advantage lies in establishing them before you start working (and in creating a list of terms that you can re-use for other clients).

This way, you won’t have to “wing it” every-time you receive a late payment from a client: you have a set system (that they agreed too) on what you’ll do when certain things occur, so there’s no stress on your end and no confusion on your client’s end about what is going to happen next.

7.) Consulting? Set a Time Limit

Consulting is an excellent way to supplement your income by taking your knowledge and sharing it with others, charging appropriately for the cost of your time.

Although I mentioned above that you shouldn’t ever do free samples, I don’t hold the same stance of offering free consulting… well, sort of.

While offering consulting is a great way to expand your network and grow your business organically due to the referrals you’ll inevitably get, remember that time is money.

It’s nice to be able to say, “Sure, we can sit down and talk about your business”, and it’s even a smart marketing strategy to do so, but you need to be VERY stringent about the time you are willing to take with these sorts of prospects.

If you are willing to stick around for a full 30 minutes with someone who may be able to help get the word out about your business (or someone who’s work you simply admire), do it, but don’t get stuck with them for 2 hours because you can’t force yourself to end the discussion.

Bottom line: it pays to be polite, but if you are using consulting as a paid source of income or a free way to network/market your business, you need to be careful with your time, those free “extended” chats can really add up.

Your Turn

Now I’m handing things over to you…

  1. What did you think of these strategies for avoiding deadbeat clients and lost payments? What else would you add to the list?
  2. As a special thanks for making it to the bottom, be sure to check out our free download on Crafting the Perfect Proposal. Grab the full PDF right here.

Thanks for reading, and I’ll see you in the comments!

About Gregory Ciotti


Gregory Ciotti loves small businesses & startups and gets nerdy about behavioral psychology on his blog Sparring Mind.

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Brook R

You mention getting an advance for part of a project, but the only way to truly never get stiffed is to simply require full payment up front.

You can do this on a weekly or monthly basis. I’ve had good luck doing this weekly, where the weeks work begins after payment is made, or an agreed-upon number of hours of work. Any overage/underage gets rolled in to the next week.

Had no issues at all with that client delivering the money!

Gregory Ciotti

Solid point Brook.

I sort of strayed away from full-upfront payments as a *must* do option because a lot of freelancers I know (especially freelance writers) have more of a recurring project schedule with many clients.

In these instances, it’s hard to have a fully up-front payment if you are billing per article (but very doable if you can manage to get paid upfront for multiple articles).

–Greg

Tristan

Excellent article. The main take-away is get it in writing so there’s no confusion as to what was agreed upon. If you “winging it” with your written agreements, you’re “winging it” with your receivables and that’s not a sound business practice

I’m in favor for the 50% down to get started and the remainder due upon completion. You have to look at it from the client’s point of view as well…How many times has a freelancer promised to deliver and then simply disappeared off the face of the planet with 100% of the client’s project money in hand? If the project fee is large, then the client might not want to commit to paying the entire enchilada up front, so a split payment is fair for both parties. Low ticket projects can be done at full face value though. A retainer method like Brook suggests is a good model for on-going work.

powers

This is so, so, so, appropriate for me right now. Just now getting paid by a client six mo. later and now they’re already asking me about the next job. I will definitely study this article. Thank you.

Gregory Ciotti

@power – Heh, don’t worry, I think all established freelancers have been here at least once, unfortunately.

If not, then they are super lucky!

Theo

Based on my 2 years doing freelance software development, having never lost a penny, the only things that work here are 1. using advances and 2. raising rates to avoid cheapskates.

Advances do work — because they create lock-in and increase client commitment. The advance money is now sunk, and the client has an interest to pay attention and make sure that they get the best results. With no advance, some clients think that they can relax, see the final work and then pay only if they like it. This general lax attitude means that they will not provide proper guidance, further increasing the likelihood that they won’t like the end product. Getting an advance from them changes all that.

But you can do even better than an advance and guarantee you’ll get the full payment. Of late, my favorite way to work with clients I don’t fully trust for the first time is to use a service like escrow.com. Escrow.com’s rates are fairly low. Once the funds are in escrow.com you know that you’ll get paid because 1. the client clearly has the money to pay and 2. the client will not be able to withdraw the money without going through arbitration with you and escrow.com.

Another setup I also used, which works works for desktop programmers and iPhone/Android devs, is getting an advance to work with the client to iterate on the binaries, while holding the source code back until the work is paid in full. If you do web work or backend work, a variant of this is to setup your own test server on which the client can look at the work and provide feedback. Upon full payment, you can then transfer the code from your test servers to their production servers. But beware — never develop on the client’s test and production servers and then erase the work you did for them on those servers once they don’t pay — that will open you up to legal liability.

Finally, a word about raising rates to avoid cheapskates. In my experience that mostly works, but raising rates won’t guarantee you avoid all cheapskates — I once worked with cheapskates who paid $100/hour and squeezed very hard to both get extra work and minimize billable hours.

Overall, I really believe that if you structure things properly from the beginning, with the proper incentives for everyone to do the right thing, then it is very hard to not get paid.

Smug, self congratulatory note to me: I just wrote a full article on how to avoid not getting paid! 🙂

Tom Durkin

Good tips, its all about point 6 for me. I ask for a 50% deposit and then the final 50% on completion of the job.

Never send any of your work over free. I had a guy ask me to do a web visual before he paid his deposit (fair enough) so i sent it over with watermarks. A few hours later he asked for the full PSD file…I told him no.

Some people just don’t have morals and are willing to rip you off no matter what!

Mathieu Martin

Very interesting article and comments.

I’d like to comment on point 4, though. I say: prepare your own contract in advance. Don’t let the client write it up and send it to you! Take a solid base contract (e.g. msabundle.com), add your own clauses (see point 6, if-then), then have it reviewed by a lawyer.

It may seem intimidating and expensive, but I think it’s the only way you can reliably get all of your conditions in the contract without too much weird feelings. Imagine receiving your client’s boilerplate contract and adding 1-2 pages worth of your own conditions, then sending it back for review 🙂

The reverse situation, however, can actually make you look much more serious and professional. Right after agreeing to working together, you send them a thorough contract, with an invitation to discuss any clause they have questions about, or that they would like added.

I think this not only starts you off from a strong position, but think it will also appeal to the right kind of client, just like a higher rates will.

Thoughts?

Ed Nailor

I have found a very useful way of managing the payment issue. I typically will offer 2 payment options… payment up front (and give a 5% discount for full payment up front) or monthly payments.

With the monthly payments, I usually will get as much as 50% up front and then will give the client up to 5 more months to complete payments. This way they know that they need to pay every 30 days and can not hold up deliverables on their end just to stretch out payments. If you collect 50% up front and 50% at completion, they can hold out on paying you for a few more weeks, or even months. The monthly payments approach puts me more in control of my budget each month.

Now this may not work for everyone, especially if your work has to be turned over to them by a deadline (print work especially.) But since I design and develop websites, I can keep the finished project on MY server until final payment is made, and if they decide not to pay, I can take it down. Makes for a win-win.

Ed Nailor

And on the contract… hell yes! Always, always, always get a contract. Even if payment is not an issue, the contract can help you identify things such as how many revisions are included in the price… nothing worse than a client that is never happy and you are stuck in revision hell with no way out.

Personally, I have my general contract terms attached to the end of my proposals. This allows the client to review everything so they know what they are signing up for and there are no “uh-oh” moments.

Web Design

Gregory you are right on the money, we have all been through these scenarios. I wish someone had told me what you are explaining in your post, would have saved me lots of time, frustration and money.

Lance Sonka

*Also include a 10 day net payment schedule and charge a predetermined (and agreed upon) interest rate on the balance if client does not adhere to the agreement.

Jared Ritchey

Nice work, this post I’ll feature on a few of my blogs. They say that people who pay the least tend to scream the loudest so raising prices is certainly one of the best ways to fight off bottom feeders. I’d syndicate this post if I were allowed to.

Jared

Sean Cook

It is always a good idea to get a down payment along with the contract. The percentage is usually 30%, but it all depends on the project scope and budget. If it is done in phases, then a percentage of each phase. This way each has some “skin” in the outcome. If you do not do a full contract but a bid estimate that they agree upon, those emails will stand up in court since they are a digital signature of sorts. However, a legally binding contract with signatures is the best choice.

Valerie Kutchey

Absolutely each new project should include a deposit, or partial payment to begin work. My proposals also include a statement about a 30-day limit on delays (when clients are slow to provide information, approvals, etc); after a 30 day delay, I bill my fee and expenses to date. This helps insure that projects don’t go on forever and frees up my time for other work.

Angela

I totally agree with you here, especially not working for free. If it’s free, people don’t value it as much as if it costs something. Also, having previously worked for a company that sold seriously bottom of the barrel prices, people tend to expect the world starting from $2.

Reza Nobakht

Hi,
I agree with most of what you said but suggest to search for and use a standard form of contract used by others in that business, say your competitors. Writing up your own terms and conditions may cause misunderstandings and not be valid legally.

If client send you a contract then you should also send your own contract for them to sign, because, their contract states their terms and conditions not yours!!

If they sign your contract then they are agreeing to your terms and conditions. For example, a clients contract may indicate that they pay within 30 days but, it doesn’t say what happens if they don’t.

Finally, if you send your own contract then they think of you as a professional outfit. Someone, who does a job without a contract is simply asking for being messed about with payment.

Natosha

I’d like to get some advice from the seasoned pros commenting on this fantastic article: do you bill for/track the time you spend answering emails, on the phone, sending files, etc? My husband suggested that I begin doing this as part of entire projects with clients, however, I’ve never known anyone in my field (graphic design) to practice this. It does take up a significant amount of my time, but I feel uncomfortable about it. Any suggestions, tips, advice? Thank you!

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