Artrepreneurs

7 Practices to get paid faster

May 28, 2021 Season 1 Episode 22
Artrepreneurs
7 Practices to get paid faster
Show Notes Transcript

EP 22:  Collecting payments can be one of the most frustrating aspects of being self-employed.  It is easy to run into clients who frequently ignore deadlines and pay you after the due date.  But nobody likes being the "heavy", so what can we do to improve our chances of getting paid faster so that we have a healthy cash-flow for our business?  In this episode, we'll go over 7 simple practices that can expedite your checks so you can keep creating.

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Michael Der  0:02  
You're listening to Artrepreneurs, a podcast that inspires photographers and visual artists to live their best creative lives. My name is Michael Der and I am a full time photographer with nearly 10 years of experience in the freelancing world. And I'm sitting down with an amazing community of visual artists to talk about process, business, and the lessons that have helped them grow. So let's get to it. Artrepreneurs starts right now.

What is up everybody, welcome to Episode 22 of Artrepreneurs, we're gonna get right into this, folks, if you want to collect payment from your clients a little bit faster, and maybe with a little bit less stress, then this episode is for you. And if you've been in the game for a minute, you know firsthand how frustrating it can be when a client waits until the very last minute to send you your payment or even worse, after the deadline. So today, we're going to go over seven ways to get paid faster. And if you are creative, who typically just accept contract terms as they come, then you will likely benefit by implementing some if not all of these practices. Now, I'm not going to guarantee that all of these tactics will work 100% of the time, but they can certainly help your chances and at the very least establish great habits to reinforce in your career. 

The importance of getting paid on time is numerous. For one, it builds trust and a good working rapport with your clients, which is really important. You know, you always go that extra mile for clients who respect you and your worth. Secondly, it makes bookkeeping so much easier to manage and to stay on top of because you don't have to scour through backlogs of old invoices and payments. But the biggest reason why punctual payment is so important is because it fuels a healthy cash flow, which is the lifeblood of any business. And if you're going to be a professional freelancer, you will encounter jobs that are going to require you to front production costs or travel expenses before you get paid. So having this cash flow in your favor is going to allow you to fund all your job and business expenses without going into copious debt or killing your credit score. 

So with a little help from the folks at Freshbooks accounting along with the correct experiences that have shaped me in my convictions, I'm going to be listing seven practices to start implementing now so that you can improve your chances of getting paid faster. 

Practice number one, make sure both parties have all the right information upfront. Alright, so this is important. Let's start with what your client needs. First, in order to get payment issued to your client is going to need all the information from your W nine form. So get into the habit of submitting a W nine form to your first-time clients the day you sign the contract, not the day you invoice them for a job. And the reason I say that is because you may have a green client or a very inexperienced editor as your point of contact. And if that is the case, they may ask you for your W nine well after the first job is completed, which still needs to be processed by accounts payable. So the result is that it may prolong your payment by several days if not a week or longer. So get into the practice of downloading the form yourself and sending it into your client well before invoicing even takes place. And for those who do not know w nine forms can be found very easily by going to the IRS website which is irs.gov. All the information there is very basic and intuitive. When you download the form, you simply fill out your name, your business name, your tax classification, like if you are a sole proprietor, LLC, S corp, etc, your address and your social security number or your tax ID. After that it's pretty much just a date and sign and then you're good to go. 

So that is what your client needs to know. Now let's start talking about what you need to know which isn't much, but it's important. So the biggest thing that you need to know is who the point of contact is that should be receiving the invoice. So here's the situation most photographers invoice the person who assigned them the job in the first place, which is very logical, but it's not always the most accurate. Your point of contact might have that invoice sitting in their inbox for five days before they send that off to accounting. So if you have the option to go directly, or at the very least include that person in on an email chain, you're way better off and you could save yourself days of waiting for payments. What you're trying to communicate with your client is that you would like payment as fast as possible by cutting out the middleman. So by simply asking who the right person is to process payment, you're letting them know that you're a professional holding them to professional standards. 

Practice number two, request upfront deposits or negotiate for faster payment terms. deposits are a freelancers best friend. They provide cash flow for your business so that you can front the cost of any particular job whether it is a travel expense for your out-of-state assignment or production costs like location permits or studio rentals. Even if you don't have any costs upfront. It's a really great habit to get into because it's going to help secure cash to pay for your day-to-day bills are your cost of doing business like rent your phone bills, your website hosting your liability insurance. What you are effectively doing is bypassing the hope for positive cash flow and instead you are guaranteeing it. So how much you determine is totally up to you. Some creatives require 50% upfront others might do 30 or 15. It's really your decision, but pick a number that makes sense for you and your business.

So in the ideal world, you're always going to get an upfront deposit. But if you can't get an upfront deposit, the next best thing you can do is to negotiate for quicker payment terms. So instead of net 30, net 60, or net 90 or whatever, try getting terms closer to what a traditional employee would receive, which is like a net 14 or a net 15, basically two weeks after the job. 

Now, industry standards are for better or worse industry standards. So in many ways, finding this cultural norm where all the freelancers get paid months after the job, can very much feel like your ice skating uphill. And ironically, what makes it so tough is that your client understands the concept of cash flow just as well, if not better than you. Why do you think they want to pay you as late as possible? Companies need income one step ahead of their expenses, which in this case, is you the photographer, so both sides here are finding themselves negotiating over the same reason, you need money on time to pay your bills and your expenses, they need to receive their income first before they can pay their contractors. So with both parties after the same thing, the best mentality that I have found is to seek out Win-Win solutions in your negotiations, let them know that you understand their situation, but also prod them for a potential compromise. Where can we improve the terms so both sides come out well?

Now, I'm not usually at the forefront of lowering your rates. But depending on your current cash situation, if you're really strapped, it may be worth you taking a lower rate in order to get paid faster. So an example might be taking 5% off the bottom line, if you can get the terms expedited from net 30 to net seven. 

Alright, moving on practice number three, use plain language. Alright, so if you've listened to this show, I've often used terminology like net 30, net 60. net 90, which are simply shorthand for payments with a certain period. So net 30 means you have 30 days to pay net 60 means you have 60 days to pay, and so on and so on. And I have been using this terminology, I think ever since I graduated college, to be honest, it's not new to me every job, I think I've had required some sort of collection, where there were terms like net 15, or net 90. But that is my familiarity with the terminology, the potential mistake would be to assume that everyone understands what that means. Not every customer or client knows what net 90 means. I know I've worked for editors and directors of photography right out of college. So while they are very talented in many ways, they may be pretty green in other professional areas. And so in the context of this podcast, I will often refer to those shorthands of net 30. net 60. net 90. But when it comes to clients, I elect to use plain language on estimates and invoices and also emails. This way it guarantees that whoever reads it will understand exactly what I mean. So instead of writing net 30, and assuming that they know what that means, I will simply write payment due within 30 days of this invoice date. That makes it crystal clear for whoever receives this invoice. And in fact, data recorded by freshbooks, the team that I use, they suggest that writing 30 days versus net 30 will actually get you paid more often and faster. So keep your language in mind, make it simple and make it plain. 

Moving on practice number four, offer multiple payment options. Alright, so cheques have long been a standard method of payment. But today's day is certainly more digital than ever. If you're not at least offering different options of payment, you're basically promoting to your client that you would like to be paid in the slowest fashion possible. A check by mail will usually take several days to get to you. So imagine a client sending out a check on the back end of a net 30 agreement, you may get that check on day 35. And then maybe you take a couple days to deposit it in maybe you don't think that's a big deal. And for some it won't be but to me that ends up being five weeks waiting for payment. What if I told you that you could get paid within two weeks without adjusting your terms. When I started accepting methods like direct deposit, credit card, PayPal Venmo I got paid so much faster, and the data backs up my personal claim Freshbooks research indicates that you'll get paid around 11 days faster when you accept credit cards online. So by my math, if I just accept credit card payments, that's 21 days on average that I would receive payment hitting my bank account versus 37 days with a traditional check method. Now for anybody asking don't credit cards and PayPal burn you with transaction fees? Well, the answer is yes, they do. And you will need to weigh that cost and determine if it's worth it for you. On one hand, a 5% transaction fee might take away money from your bottom line. But if you can't pay off your credit card bills in full each month because checks are in the mail, then Aren't you already giving up money as it is? Credit Card interest rates are almost always higher than 5% anywhere between three and five times that amount. So do the math on what makes sense for you. The other option is to start patting your pricing estimates to account for that transaction fee. So if you know your credit card transaction fees take 7% off the top, consider adding 7% to your total estimate. 

Alright, so moving on practice number five offer rewards for early payments.  So in this part, I really want to talk to you about providing incentive for your clients what is in it for the client to pay faster? Remember, cash flow isn't just important for you, your clients are also protective of their cash flow as well. So what incentives can we offer that might help you get your income into your account faster? Could you offer 5% off if you pay within seven days that may not seem like much on a $300 assignment, but on a $3,000 assignment, it might move the needle for your client, could you offer half off a future shoot if your client pays you the same day, this incentivizes your client to not only pay you immediately, but it might create repeat work and a stronger working relationship. So think creatively about what you could offer your clients going forward, what small wins would help their needs as well as improve your cash flow. 

Practice. Number six, charge late fees. So it's really not good enough to just encourage clients for good behavior. We also need to keep clients accountable if they don't honor the agreement. That's where late fees come into play. This is going to protect you and your cash flow, as well as give you some authority in the relationship. I like to keep mine somewhere around 5%, because it's not quite enough to ruin a relationship with an absurd penalty. But it is enough to give some incentive to pay on time. So ever since I've implemented late fees, I have seen my clients pay faster and on occasion when one assignment does get overlooked, they almost always honor the additional late fee. 

Practice number seven, automate your late payment reminders. So in order to maintain a healthy client relationship, it is really important that you give a client ample reminders, don't just send an invoice and then after the 30 days are up send a collection notice with late charges, that's only going to come across as being unpleasant and someone that they don't want to work with again. So the best way is to send notifications and reminders politely. Alright, so let's take a net 30 agreement as an example, after the first invoice, I will usually send a friendly follow up reminder around day 15, which is about the two week mark. And if I still don't hear from them, or if I don't receive payment, I will follow up with another one around day 23, which is about seven days away from the due date. And if I still have not heard from them, and I still haven't received paycheck, then finally I will send another one around day 27 about three days away from the due date. So this way the client has received three follow ups and in no way should be surprised if there's any late charge included. 

Now, nobody likes to be the heavy and nobody wants to look at a calendar that frequently to check up on their clients. So what has really been important for my business is to rely on a cloud accounting software that can automate this process. Once I set the terms on the invoice, my software will automatically send notifications, however frequently I wish whether it's every day, every seven days every two weeks. And additionally the reminders also act as a third party representative. So it never really seems like I'm the one asking for money. It's my accounting software speaking on my behalf. So there's really no unpleasantries between me and my correspondent, removing myself from the personal emails or phone calls to my clients asking for payment has been one of the best return on investments I've made. And if you are interested in accounting software and seeing if you can take that next step in improving your back end administrative duties, here are a few options to check out when you have time. 

The first one is called wave. This is a free software. So if you're on a tight budget, go to waveapps.com and check them out. Now I don't personally have experience with them. But for a free accounting service that allows invoicing and payments, it might be a great introduction for anyone looking to manage their back-end business a little bit better. 

The next one is called honeybook. And this software offers just about everything that you need at an affordable entry price that includes proposals, contracts, invoicing, everything, so go to honeybook.com. And check out their packages. I know a handful of creatives who use them and swear by them, so kudos to them for producing an affordable but great service. 

And the last one is my favorite platform, which is Freshbooks. And they are the cloud accounting software that I have used for the last five or six years they are no joke as instrumental to me as photo mechanic or Lightroom is they give you everything from estimates to invoices to direct payments to even mileage tracking on the phone app. So it is a great investment that has consistently yielded great returns for me. Full disclosure I am an affiliate of fresh books. So if you are interested and you go to entrepreneurs pod.com underneath the affiliate drop down, you can click on the fresh books link and any purchase that you do make I will earn a commission but at no extra expense to you. 

So to review, let's go over the seven ways you can improve the speed of your payments. Number one, have the information upfront from both sides. That means getting your clients a signed and dated w nine before you invoice them. And on the flip side make sure that you know who the point of contact is going to be for processing payment. Number two is to request upfront deposits or negotiate faster payment terms if you can't get a deposit these are the most direct ways to ensure your cash flow stays healthy. Number three is to use plain but articulate language so that your client knows exactly how many days they have to send the payment. Number four is to offer alternative methods outside of just check by mail that is the slowest method of payment so offer direct deposits, credit cards, or online transfers like PayPal or Venmo. Number five is to provide discounts or special offers for any type of early payment so this will incentivize your clients to pay early and potentially book their next shoot with you. Number six include a very comprehensible late charge. And then lastly number seven automate your late payment reminders so that you can keep creating while the software handles the uncomfortable collections process for you. 

So I hope this helps you out folks. collecting money I know is never easy, it can be uncomfortable, particularly with new clients and if payment happens to be late or tardy, it can become downright unpleasant for both sides and we call that a lose lose situation. So if you can communicate your ideas and principles clearer throughout the entire collaborative process, that means your emails, your estimates, your contracts, your invoices, you're going to set yourself up for success with all your future negotiations. Remember, this is not just about making the process easier for you. It is also about serving your clients in a concise and professional manner that they will greatly appreciate going forward. Alright, so that will wrap up today's episode folks, I do appreciate you all for tuning in. wish you the very best in your creative endeavors. My name is Michael Der and this is Artrepreneurs season one. Peace out everybody and have a great week.

Hey everybody, this is Michael Der thank you so much for making it all the way to the end of the episode. I hope you'll follow tag and engage with us on our Instagram account at Artrepreneurspod. We've also launched our website Artrepreneurspod.com.  It is the central hub where you can sign up for our newsletter, read our blog posts, send us voicemails, and even access discounts from our amazing affiliates. It's also the perfect spot to shout out Artrepreneurs with what would be an immensely appreciated five-star rating and review. And if you're feeling extra generous, you can even make a small donation that's really going to help accelerate the growth of this podcast. But no matter what you do, folks, I just want to say thank you so much for supporting this program. There are a lot of great photography podcasts out there and I am just grateful to have gained your trust even for a moment. Take care everyone. See you next week.

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