Just pay me.
blog.samuellevy.com
blog.samuellevy.com
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...
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.
In theory you can assess late fees and you might actually collect some.
But the truth is if someone is jerking you around on payment and they offer to pay sans the late fees most vendors will accept that and move on. In fact I've had people who claim to be filing bankruptcy (claim) and offer x cents on the dollar for any amount owed. In the end you make a decision do you want to take the money or go for door number two.
Legally entitled really means very little. What counts is the cost of enforcing the contract and the time it takes and any leverage that you have (like a kill switch as OP had mentioned)
A kill switch is pretty silly. All you need is "the copyright transfers on full payment for services rendered" in your contract.
Possession is 9/10th of the law.
Or as Capone put it "You can get more with a kind word and a gun than you can with a kind word alone."
I also agree with the OP that you get better clients as well.
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.
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.
True, but payments for services rendered are generally not considered loans and usury laws don't apply.
If I was doing business with this guy, I would be upset with this policy:
10% per week, every week, starting from the first day that the invoice is overdue. That means that if your invoice is due on Wednesday, and by Thursday you haven't paid it, I'll charge you 10% of the invoice again on top of the original amount.
How is the following day 1 week late?
Also, I agree with you on the NET 30. He gives 10 days to pay, and thinks that is standard. Got to be kidding me.
If by next Thursday you still haven't paid, then that 10% turns into 20%. If you leave it for a month, congratulations, your invoice is now 150% of the original.
4 weeks in a month.. so:
day 1: 10% day 7: 20% .. day 30: 50%
It only works if he charges 10% the very first day it is late.
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.
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.
I was quoting a $10,000 project.
I didn't call them back.
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.
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.
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
If it's written down and signed, it's much easier to know what everyone has agreed to, so that is much better.
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)
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...
It worked fine until their industry (renting videos and DVDs) dwindled to nothing. Blockbuster's demise had nothing to do with late fees.
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.
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.
If they've stopped paying you, no they aren't.
Also, I'm not advocating being some sort of deliberate jerk or something. You should treat not-customers well too, because someday they may be customers, and that's probably especially likely in this case. But they have ceased being customers at the point of nonpayment, and it's important to understand that.
That's BS. You talk to your customer and tell them payment is due. You then act accordingly based on the legitimacy of the response. Believe it or not, there are quite a lot of organizations that just pay on their own schedule (i.e., 60 days after receipt of invoice, regardless of terms), but they do pay.
Going adversarial at the first moment of non-payment (i.e., "they have ceased being customers at the point of nonpayment") is just a sign of inexperience and honestly, ignorant of how businesses typically work.
If you don't realize how easy the "check in the mail" excuse is for people whose job it basically is to sell you on that, consult for five years and check back with me.
This isn't adversarial. This is how payments work. Adversarial is not making payments you agreed to make. Adversarialness has already arrived. You need to react to that fact. Again, that doesn't mean "go directly to lawsuit, do not pass go", but you do need to correctly understand the situation.
I've been consulting for over 10 years and have never not been paid. First, I don't take on every prospect who offers me a project, secondly, I don't overreact on late payments because I don't live "paycheck to paycheck".
On longer projects, I always state up front that I'll just stop work if an invoice is overdue by 60 days. I don't ask for deposits or make counterproductive late penalty threats. But the main reason why I get always paid is that all my customers need to pass my smell test. You can usually tell a nickel and dimer from the first meeting if you know what to ask and look for.
From what I've seen, the people who have the biggest issue with late payments are those who live hand-to-mouth. I've always told new contractors to make sure they have 3 months or more of living expenses before they even start contracting to accommodate payment cycles or interruptions.
--edit-- Hand-to-mouth is the worst situation for a contractor, because they're going to take on whatever projects are dangled in front of them, because of the urgency to pay the bils. When you do that, you end up with the customers with the worst payment records.
But there are some more concrete clues. If they ask for bulk discounts on hours, if they ask to negotiate the rate up front, if they seem to talk "bigger" than they need to, if they think the work you do is "easy", if they act like they're doing you a favor by offering you a chance to bid on the business, etc., those are hints that money will be an issue or that they don't really value your services.
I never, ever, deal with small local businesses - i.e., those that don't seem to have owners with corporate backgrounds. Smaller business owners tend to not be accustomed to throwing around >$100/h for services. I'm generalizing, but if they're paying their staff $10/h, they expect 10 times the output for $100/h. IMO, those guys are trouble, run, run, run away if you can, because you'll get nickeled and dimed out the wazoo.
So make sure your contracts say what you want them to say, and mention payment terms. If you're working with a larger company, chances are they'll mention the terms they use for payment. Either adapt your contract for that client, or find someone else to work with.
Once the rules are agreed on, late is late.
On a first offence, I always give the benefit of the doubt.
In fact, most of the more important creditors we have to keep happy to in order to keep our lives functioning are far less lenient -- and have far more recourse to make our lives miserable if we don't pay up -- than most freelances are with their clients.
Think about it. If I forget to pay and he charges me %10, I'm probably going to wait the whole week to pay him just to make life harder for him as payback. This system over-punishes people who have just made mistakes and encourages and enables his customers to antagonize him.
In practice, my clients have either negotiated better contracts paid on time (I've not had an issue with any client who's negotiated); or paid up the original amount as soon as I mentioned activating this clause.
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?
As I said, no idea about laws but I wouldn't be surprised if this is against various industry standards.
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.
2) A strict limit like 1.5% strikes me as odd, since in many similar cases judges pull in all kinds of "fairness" questions, like what the market is like, and how much it would burden one party to comply with the rate / go without payment. So maybe the Lawyer was saying, "this is as much as I know I can get from a judge, so even though we might be able to squeak out another half percent, I'm going to call this a 'limit' so it's simpler," OR and this is a big OR, your jurisdiction has just stipulated this rate for your industry. States are wacky, who knows.
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.
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).
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.
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.
It's not unusual for larger companies to call for a 10% reduction after a couple of years. "Considering the size of our mandate, our generous contracts in the past, we think it would be appropriate for you to lower your prices in the future. By the way, last weekend I was at this cocktail party and my wife introduced me to John Lasseter. Doesn't he run ACME CORP, one of your competitors? Pretty funny guy that John... And smart!!!"
Of course you should never allow a business relationship to grow to a size where its rupture might impair the health of your company, but seriously, this isn't always possible.
As an aside, I don't think your abusive penalty would be enforceable (in the UK anyway).
I would never agree to your terms.
All the same, however, that doesn't necessarily mean that he can't include it.
Not only that, but terms on an invoice don't form part of the agreement for the work and are not enforceable. The invoice is issued post-work and hence post-agreement. The caveat is if you include pertinent terms from the existing agreement on your invoices for informational purposes.
"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...
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.
http://papers.nber.org/papers/w18237?utm_campaign=ntw&ut...
"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."
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.
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.
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.
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.
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.
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.
Received payment that day.
Kill switches work wonders.
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.
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.
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?
Late-paying customers are just part of business.
Such practices are flat-out illegal in some jurisdictions.
I may not be remembering this correctly, but I think Canada is one such jurisdiction.
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.
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.
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.
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.
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].
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.
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.
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.
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.
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.
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
Update: Having looked at your resumé, I probably wouldn't work with you anyway.
Communicate often. It helps.
(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.)
I'm pretty sure that's much much more than the maximum rate permitted by law.
It's not worth the stress, trust me, I've been there. Full disclosure: I just joined the team as DoP.
For example, 2/10 net 30 means 2% discount if paid within 10 days, otherwise full amount due in 30.
Of course, in the end, you put what the law allows and your clients will accept....
If your clients can't get their act together in 10 days offered to work on retainer.