If you’ve been freelancing for a few years, chances are you’ve had trouble getting paid at some point.
The client was slow to pay. Or they lost your invoice. Or they held your payment for some weird and unfair reason.
When that happens, you have a choice. You can rant about it. Foam at the mouth. Call Tony Soprano. Lose sleep.
Or you can use that as a learning experience. And change what you do in order to prevent that from happening again (or at least to prevent it from happening as frequently).
As passionate as I about my business and as much energy as I put into my clients’ work, I’ve chosen to focus on the latter.
Not only has it been more effective, but it has also enabled me to retain my sanity and peace of mind. And in this episode my guest, Katie Lane will share some very practical ideas for preventing these nightmares from happening.
The notes that follow are a very basic, unedited summary of the show. There’s a lot more detail in the audio version. You can listen to the show using the audio player below. Or you can subscribe in iTunes or on Stitcher to get this show delivered straight to the Podcasts app on your smart phone, tablet or iPod.
Tell us about your work
Katie Lane is an attorney and negotiation coach. She helps freelancers make sure their contracts are in good working order, especially in the areas of getting paid and intellectual property.
She started her practice over three years ago and has a blog at Work Made for Hire that covers these topics.
What can we do to help make sure clients pay us?
If you want clients to take you seriously, present yourself as a small business instead of an individual.
Incorporating or setting up your business as an LLC tells the client that you’re serious. It also protects you. Choose a name for your business that’s different from your name.
You should have a contract you present to clients. Having a contract tells clients you know what it takes to do the job successfully. Even just presenting the paperwork makes clients take you more seriously.
When clients pay you, they’re investing in themselves. You’re providing them with something that will help them build their business, make more money, grow their reputation, etc.
What can we do to better position ourselves within the client’s company?
Ask your company contact lots of questions. Find out what you can do to make it easier for them to pay you. Understand their billing and budgeting schedules. Ask where to send invoices.
Asking these questions early on will save you tons of time later.
Should people incorporate? If so, what type of structure should they adopt?
Structures differ from state to state, but generally, a limited liability structure works well for many solo businesses. It protects your personal assets. The company is responsible for paying debts and fulfilling obligations.
For some solo businesses, structuring as a corporation works better. The best choice for you will depend on your income and other factors. Talk to your accountant.
What should we include in our contracts to help us get paid?
Start by figuring out the best policies and procedures for your company. How many days do people have to pay you? What happens if they pay late? Determine your policies (and consequences of noncompliance) and make sure your contract supports them. It’s much better to figure these out before you’re emotionally involved.
There’s a lot of power in saying, “This is my company’s policy.” If clients want something that’s contrary to policy, you might levy additional fees.
Include termination fees in your contract. Set these fees high enough to discourage people from walking away. You can price termination fees either as a percentage or a flat fee—but a percentage fee is often less scary to clients.
When’s the best time to request payment?
Most people request payment upon project completion—but you can end up waiting a long time. Others request payment when they submit the first draft.
Whatever you do, tie request for payments to points in the project when you deliver something of value.
What else should we include in our contracts?
Include a note about scope of work. For example, if the scope of work broadens, you will charge additional fees.
Make clear when intellectual property transfers from you to the client. Unless you’re in a work for hire arrangement, your contract should state that you retain intellectual property until the client pays. This arrangement offers incentive for the client to pay you.
Most contracts declare which state law covers the contract. Client contracts usually specify the state most convenient to the client. Katie encourages freelancers to add an exception so they can litigate through small claims court in any state.
What is a work for hire arrangement?
The contract must explicitly state that an engagement is “work for hire” or “work made for hire.”
In this arrangement, the client owns what you create the second you create it. Your fees should reflect the fact you don’t own the work or have rights to it. Use other tools to compensate, such as late fees and work cessation for overdue payments.
Work for hire arrangements are common in certain work categories. (Visit copyright.gov for a list.) Most freelancers don’t fit into these categories.
What if clients expect me to use their contracts?
Compare your contract to the client’s contact. Where there are differences, request changes or compensation of some kind, such as higher fees.
If you accept the client’s contract with no changes, you’re creating problems for yourself. It also tells the client you’re not paying attention to details.
Often, contract administrators have leeway on contract terms. But they won’t tell you that! You have to ask, and you have to ask before you sign.
Where can listeners learn more about you?
Katie Lane’s blog: Work Made for Hire.