Freelancing Tip: Get Paid As Frequently As Possible
November 23, 2009
Billing clients can be a pain. It takes time and requires additional record keeping, but all of that is better than not being paid! The advantages of frequent payment are numerous, but it is really reducing the risk of not being paid that is the real benefit to frequent billing.
Last year, I was working with a large office to complete an internal website, and while the project wasn't huge, it accounted for two months of my yearly income. My standard payment structure was to collect 50% up front (good), and the remaining 50% at the completion of the project (bad!). Somewhere around 90% completion, the office could no longer make their debt payments, and they filed for bankruptcy. A years worth of lawyer/bankruptcy stuff later, and I'm out half of the total that was owed to me, or about a month of income (plus all of the time filing out forms and legal documents to try and get my money).
Looking back on the initial proposal, it could have been pretty easy to break the project into smaller pieces, and I could have collected closer to the amount that was owed to me when the company went under.
I thought that I had learned my lesson, but I recently started a project that has me being paid monthly, which is nice, but I soon realized that I can rack up quite a bit of billable time during that month! If the company I am currently working for were to go under, I would be out nearly as much as I did during the bankruptcy that I experienced last year. Apparently I didn't learn. Looking back on it, my contract really should have specified to be paid twice a month, to reduce my amount of risk.
It is advisiable, really no matter how large or small a project is, to collect any money you can, as soon as you can, whether it's at project completion milestones, or on a regular schedule. The biggest risk in working for yourself is the unexpected. I certainly didn't expect a large organization to go bankrupt, leaving me with a month's worth of money, but I could have reduced the risk of the unexpected quite easily, and from now on, I will.
