The often unspoken, always frustrating and sometimes embarrassing conundrum that all but the best-connected Freelance professionals are almost certain to encounter at some point is the dilemma of late invoice payments. Talk about a pain point! Waiting for money to arrive can keep you awake at night. A pile-up of late payments can do a lot of damage to a Freelance business and your credit score, too. I routinely include on invoices the preferred payment timeline, which was originally 30 days, but several years ago was shortened to “payment is requested upon receipt of this invoice.” It’s important to set expectations regarding timely payment for services rendered.
It’s been documented that cash-flow difficulties are among the leading cause of shutting down an independent entity. I don’t think former Secretary of State (1973-1977) Henry Kissinger had to worry about erratic receivables when he returned to civilian life and pursued independent work. The powerful always get paid. Readers of this post, I surmise, ought to devise a pro-active invoicing and collections strategy to defend yourself against 45+ days invoice payments that can undermine your intention to manage your own business accounts payable, along with your personal expenses. Slow payments leave one vulnerable to exorbitant late fees.
Your value transcends billable hours
The moral of the story is, avoid hourly-paid work assignments whenever possible. Clients who outsource hourly project work often have a nickel and dime perspective and they are inclined to under-value you and your solution. The axe they’ll use to chip away at your billable hours, no matter how modest, is always within reach, so that a few more dollars can be made available to fund a project that decision-makers feel outranks your work. The billable hours mind-set labels hourly workers (you!) as a commodity. That your skill-set qualifies you to become a collaborator who is capable of delivering sustainable positive outcomes to the client’s organization is unrecognized by the penny-wise, pound-foolish billable hours types. Those individuals are unable, or unwilling, to recognize strategies and actions that you are positioned to recommend might help the client’s company break out of a stagnant status quo and move forward.
Your first order of business is to transcend the hunger for revenue, which may cloud the confidently rational thinking needed to envision a more sustainable business model for your entity. The goal is to upgrade how prospects and clients see you, the caliber of the solution and the contributions you can make to the client’s organization. For guidance, lean into the fractional model of independent working.
Much will depend on your deliverable and industry, but you may find it useful to reframe the perception of your B2B service and interpret the expertise and insights that are the core of your work and promote it as a systemized package, a process improvement system, that once instituted enables your client’s organization to optimize the realization of the mission and goals. Yet, the billable hours model limits the expression of your value and reduces your deliverable to as a band-aid fix. Reframe how you articulate your deliverable and demonstrate that what you offer is not a commodity.
When you’re invited to manage a large, one-off project, you can set the timing of invoice payments by stipulating that the client make an initial payment of 10% – 15% before you begin work. One or more interim payments can be triggered when you achieve project milestones that you and your client will identify together. Your goal in this instance is to limit the final payment to no more than 25% of the total project fee. Include the payment agreement in your proposal and reconfirm it in your contract. Clients are more likely to take retainer fees and major project agreements more seriously than hourly work and they are therefore more likely to pay your invoices on time.
Find a financial system that you will follow
In the final chapter of this story, you’ll acknowledge that Freelance professionals need a financial management system to document your monthly revenue generated, track where your money goes and how much you spend and guides you to separate your business and personal transactions. Good financial management will help you stay organized for quarterly and annual tax seasons and will also support your business (and personal) decision-making by confirming what you can afford to spend and when.
You may find financial management unpleasant, but no adult can escape, whether one is an independently employed Freelance professional or a W-2 employee. In particular, those who are often faced with irregular payments must buckle down and conduct a money minding session every month. You’ll need a tool for financial record-keeping and your choice will depend on your personality type. You may like a digital platform that offers a good option to single-person business entities, as does Quicken; or you may gravitate toward the Microsoft Excel spreadsheet. If your budget allows, you can outsource this role to a Freelance bookkeeper.
Your financial picture is foundational to nearly all business planning, to ensure that you’ll be able to carry out your actions. A system that works is one that gives you a clear view of your available funds, money that’s available to support business operations (working capital) bill payments you must make (accounts payable) and outstanding client invoices (accounts receivable). Establishing and following a financial management ritual provides an accurate picture of your financial capacity In Real Time and lets you know when you have the green-light to move forward without second-guessing every transaction. Just do it.
Thanks for reading,
Kim
Image: Edward Pevos for MLive









