Subscribe to Inc. magazine
ACCOUNTING

Cough It Up!

Advertisement

What? You just finished a million-dollar project for a Fortune 1000 corporation? Congratulations!

Say, when do you get paid? (Pause.)

Oh...

In the excitement of finishing (or even getting) a big job, it's easy to forget that the most important element of any project is getting paid. Companies often assume that IPs can wait for payment 30, 45, even 60 days after invoicing, a common misconception that often goes unmentioned. You and I know it's not true, but do your clients?

Taking time to outline payment terms before a project starts establishes a professional relationship with a new client and increases the likelihood of getting paid on time. It addresses any confusion or misunderstanding about payment expectations and eliminates any surprises during the course of the project.

Here, some experienced IPs share their insights on getting the job done without getting stiffed.

Get the Facts

Knowing a client's payment policy before you start a project allows you to bill accordingly. For example, your new client may have an established policy for how soon to pay invoices with a timetable that ranges anywhere from 30 to 90 days.

"Knowing your clients' payment period is important," says Michael Matassa, an independent video editor in Atlanta, Georgia. "Most of my clients have a 45 to 60 day payment cycle, so I invoice before the project starts to stay ahead of the payment schedule."

Prepare for the P.O.

Some corporations issue purchase orders -- internal documents that authorize payment to a vendor -- for every expense. Purchase orders are typically for specific amounts and must be cleared by the client's accounting department before they can be processed. If your client issues a purchase order, read it carefully; it may limit the amount to be paid, and if your fee exceeds this amount, you may have to submit additional invoices and receive purchase orders for each before you will be paid. Submitting multiple invoices and waiting for corresponding purchase orders sounds laborious and time-consuming, but it may actually get you paid sooner: as a rule of thumb, smaller invoice amounts are processed faster than larger ones.

Up-Front Payment

Depending on your profession and clientele, you may be able to negotiate up-front payment for services rendered. Houston business coach Sherry Lowry does. "Almost all my payment agreements are handled without any problem at all because I work almost exclusively on prepaid retainer," she says.

If she isn't working on prepaid retainer, she gets payment terms in writing. "If a corporate client has a set payment cycle -- for example, paying bills on a certain date," she says, "the terms are discussed in advance and written into the contract. I then bill accordingly."

Sign on the Dotted Line

Outlining the project and payment expectations before a project starts is important. Develop a written contract that is signed by both you and your client when you are awarded the job. A contract should define the scope of the work, outline associated expenses, and address payment terms.

"I always discuss fees for writing and photography before I accept a job," says writer/photographer Pricilla Estes of Philadelphia. "I discuss expenses such as film, phone charges, and overnight mail, and I make sure the publisher knows these expenses will be passed on in my invoice."

Get a Deposit

Establish a standard policy that requires partial payment up front, a practice that's becoming more common. The up-front payment is usually based on a percentage of the estimated project fee. This policy can also help to defer out-of-pocket costs that occur during the course of a project.

Atlanta graphic designer Wade Forst elaborates: "I require a 50-percent deposit on all work. This process helps defer the overhead costs associated with print production, such as digital proofs, film, and matchprints. The expenses are then itemized and included on the final invoice."

Like Forst, Matassa also requires a deposit of 50 percent. "Because it's an industry standard to wait 45 to 60 days for payment in my field, a 50-percent deposit helps ease the wait period," he says.

Address Changes and Revisions

Every IP wants happy clients, but nobody wants to be caught in a revolving door of changes. Written agreements should address terms regarding edits, changes, and revisions. It is common to include two or three rounds of revisions in the price of a project. If more changes are required, give a percentage or specific dollar amount of additional cost that will be incurred.

"Since I charge by the hour, I give an estimate for the amount of time a project will take," says Forst. "The estimate includes two rounds of revisions. Any more, and I charge an additional hourly rate. It's never a problem because add-on costs are clearly addressed in the contract I have all clients sign."

Define a Payment Schedule

If the project is ongoing, the contract should include a due date for each payment, as well as expected deliverables to be completed by each payment date. Once you evaluate the scope of the work, develop a payment schedule and have your client sign off on it.

"Because I'm paid on retainer, I negotiate 30 days' advance payment by the first of the month," says Lowry. "For corporate clients, I present a series of invoices that are due within 30 days."

Give Progress Reports

It's common for projects to take longer than expected, which is an invoicing challenge if you bill by the hour. Regularly informing clients about the time you have spent working for them makes it easier to renegotiate an estimate.

"Many times clients ask for additional services or change the scope of a project entirely," says Forst. "When this happens, I give them a written progress report on how many hours I have spent on the project and let them know we are approaching the estimate amount. I then have them sign off on an adjusted estimate."

Hand It Over

The project is complete, the service is rendered, and the deed is done. Hopefully, your client is amazed by your brilliance and will write you a check on the spot. If not, here are some suggestions to expedite your payment:

  • If you don't request an advance deposit, and instead decide to wait until the project is complete to send a bill, give your client an incentive to pay at the time of delivery. This might be a small discount on the project you just completed or a discount on future services.
  • Hand your client a final bill with a due date that is based on the original invoice.
  • Offer a 2 to 4 percent discount on invoices paid within 10 days of receipt (accounting departments love this!).

In the end, it's best not to assume the check's in the mail.

Entire contents copyright © 1999 Aquent. All rights reserved.

Last updated: Oct 22, 2000




Register on Inc.com today to get full access to:
All articles  |  Magazine archives | Livestream events | Comments
EMAIL
PASSWORD
EMAIL
FIRST NAME
LAST NAME
EMAIL
PASSWORD

Or sign up using: