I spoke with a freelancer the other day on the phone and he was quite distressed. He was telling me how he’d done work for a long term client that had suddenly gone cold on him. Not answering phone calls, emails and in general, being quite evasive. Apparently he had performed some onsite optimization work for this particular person without using a contract or invoice. Bad move.
In questioning this, his response was a bit concerning. He said “I didn’t use a contract or invoice with this person because he’s a long term client. I didn’t think I’d have any trouble.”
Unfortunately he had, and now he was hurting financially. Although the money outstanding was only $2,600, it was enough to make him realise just how wrong it was to simply assume that it was okay to trust a long term client and not use proper invoicing and documentation.
A handshake doesn't constitute a binding contract.
Before I go any further, Id like to make the following points:
- Never perform any work based upon “trust”. Regardless of how well you may know the person, trust wont pay the bills.
- Never perform any work based upon “friendships”. Often offering work on the side to friends is the worst thing you can do in business.
- Never perform work based upon “good will”. Goodwill doesn’t pay the bills, just as trust won't.
Having said that, how can we prevent the likelihood of non payment, and perhaps even get paid in advance, before doing any work?
Im glad you asked.
The first answer should be obvious. To avoid non payment, always use a contract which clearly outlines payment terms, deposits, and your refund policies. This is an absolute must, and something I wouldn’t normally mention because it should be a no brainer. However, it's definitely worth repeating!
Secondly, regardless of who it is that you’re helping, whether it be your mother, your brother inlaw or a long term client – always use a contract and correct invoicing. This is business, and these documents may just become your only line of defence if any type of dispute arises.
Remember, each of your clients should be aware well in advance of what to expect with your payment policy. Setting your policy so that clients are expected to pay a certain percentage of the cost upfront before work even commences is a good way to determine potential good clients from bad ones.
In most cases, clients that are okay with making payment upfront are more likely to become legitimate long term customers. They have an immediate appreciation of the value you will be providing and the service you will be delivering. Unlike clients that ask for results first, payment second, clients that happily pay their deposits in advance are the ones you want to keep.
Clients that are either hesitant or reluctant to pay an initial deposit are, in most cases just going to be trouble. These are the types of clients you’d be best of avoiding.
Getting paid in advance.
Okay so how can we get paid before even doing anything?
How great would it be to receive 6 months worth of a project in advance, in full, before even starting? That would be fantastic wouldn’t it? Of course it would! Especially if you're charging 2 or 3 thousand a month! But how?
The answer lies in an early payment discount.
Offering incentives to clients to pay early can be another way to entice them to pay the full amount up front or within a short amount of time. It can also offer huge benefits to your cash flow to have more money coming in regularly rather than having to chase up late payments.
Essentially, you can quote a price for work to be completed, but state on your invoicing that a discount may apply for any fees paid within 7 days, or if the entire amount is paid up front. The amount of discount is completely up to your preferences. However from personal experience, if I can offer a client a 15-20% discount on a $2,500 a month campaign if they pay upfront, they’ll take it every time.
In summary, heres a few pointers that I hope you can apply in your own SEO business to avoid having to chase non paying or late paying clients.
- Be sure to have your clients sign off on everything put forward. Without signature, theres no real way of proving that your client actually received the paperwork or agreed to your terms at all.
- Be sure to run copies for yourself and your client. Each party should have copies of all documentation and contracts at all times.
- Signature and initial all relevant pages. Not just the last one.
- Always send both hard copies as well as non editable soft copies to your clients. Believe it or not, I had a client once that tried to backdate his invoice!
- Always send 2 invoices for each payment. Payment outstanding and payment received.
- Keep all of your emails. These, in conjunction with your contracts can be used in your defence if any legal issues arise.
- Always do the right thing by your clients with invoicing and keep them up to date.