5 Ways to Prevent Cash Flow Clogs

Slow paying clients are a PITA and the wallet. Fortunately, all of my current clients pay promptly, but I have had clients who were slow to follow up on invoices. It’s annoying when your bills are coming due in a few days. It’s infuriating when your bills were due last week.

It's critical to keep the money coming in on a steady basis and to be paid for your work when it's complete. Here are some ways to keep your cash flowing easily.

Take deposits.

Requiring a 50% deposit isn’t necessarily about a lack of trust in the client’s ability to pay on time. It’s more of a “good faith” deposit to guarantee my time. It shows the client is serious about the work and won’t back out on the project because they share in the risk, too.

I typically require a 50% deposit on orders that are larger than $100. Orders less than $100 are payable in full upfront. There are a couple of exceptions, but for the most part, those are my payment terms. You can choose to require 50% deposits on all orders, or only orders that are above a certain amount. Choose what you're most comfortable with.

If you take deposits, let the client know you won't start working on the project until the deposit has been received.

To be on the safe side, I don’t spend the deposit until I’m done with the project. I don’t necessarily anticipate problems, but I like to err on the side of caution. I always want the ability to easily refund the client’s deposit if there are extenuating circumstances.

Split the project.

If you have a large project that'll take time to complete, you can split it into parts and have the client pay you as you complete each part. For example, 50-50 payments required at the start of the project and before the second half of the project. Again, this keeps you from being stuck with a large project that you may or may not be paid for. Let the client know that proceeding with the project is contingent upon timely payment.

Another reason for the split is to accommodate clients who don’t want to pay you upfront. I’ve worked with professionals who do charge upfront and others who bill you as the work is being completed.

Set short payment terms.

Set a rule that payment is due no more than seven days after the project is sent. Anything longer than seven days is just enough time for your clients to forget that they owe you money.

Let clients know payment terms upfront and when they see the payment due date on the invoice, there shouldn’t be a surprise. In fact, you can set the payment due date that at the start of the project if you’re working on a fixed deadline.

Invoice immediately.

The longer you wait to send your invoice, the longer it'll be before you get paid. Get in the habit of sending invoices right after you finish a project. I suggest sending the invoice separate from the project so there's no confusing the invoice with one of the project documents.

Invoicing isn't fun, but it shouldn't be a chore. If you don't have an invoicing system, check out The Freelancer's Quick Guide to Accounting and Bookkeeping to get one started.

Explain your payment methods.

Help your clients pay you on time by letting them know exactly how they can pay you. Include it in your initial communications and print it on the bottom of your invoice: “Payment should be made via Paypal to payments@ myemail.com.”

If you accept checks and money orders, state to whom they should be payable and to where they should be sent. Side note: If I were accepting check payments, even eCheck payments, I’d require the complete payment be sent and cleared before work started.

Should you make exceptions?

Not every client will comply with your payment terms. Some have their own rules and will push back saying, “We only pay 30 days after receiving the finale project.” You can choose to make an exception or you can stick by your terms. Will you lose the project if you don’t bend? Perhaps, but a client who gives you grief about your payment terms could be problematic down the line, so losing them early on could be a good thing.

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LaToya Irby is a full-time freelance writer and a graduate of the University of Alabama. She primarily writes about personal finance, freelancing, and other self-employment topics.

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10 thoughts on “5 Ways to Prevent Cash Flow Clogs”

  1. LaToya, Always glad to read more of this freelance finance series!

    I feel like a lot of your billing policies, as a freelance writer, should depend on your target market. What kind of a budget would you target market have to work with a freelance writer? Would they be able to pay upfront? I take all upfront payment, as a general rule, for everything equal to or less than $1,000. Of course, I work with clients on this. Clients that find my Web site know they need a writer and thusly have a budget. Some clients I prospect didn’t realize they needed a writer and may need to work on an invoicing basis because they don’t currently have the budget (but will) and need a freelancer.

    What’s next in freelance finance? Oooh, ooh 🙂

  2. I’d hold off on working for a client who didn’t have the money to pay me. If the business has a policy of paying invoices after 30 days, that’s one thing. If they need 30 days to come up with the funds, that’s risky, if you ask me.

  3. It is risky. I think that is something that really does have to be treated on an individual basis. For example, I’m courting a CEO now that wasn’t going to hire any freelance writers and doesn’t have the money…right now. He will have it, and he would have had it, but is a matter of timing. If a client wants to work with me and doesn’t want to wait, I either decline or negotiate a strict payment schedule. Haven’t gotten stiffed yet…but it isn’t something I do a lot. Like I said, case-by-case basis.

  4. I work mostly with publishers, and they have their own rules that are pretty much down pat. Mostly, 60 day payouts ad only 20% down. It’s suckish but I certainly wouldn’t turn down their business.

  5. @Allena, I totally agree. Larger publications who work with writers on a regular basis usually have their payment terms defined. Writers have less flexibility negotiating other payment terms. I wouldn’t consider these publications a cash flow clog because you know when to expect payment and you can adjust your budget accordingly.

    When I think of cash flow clogs, I think about individual clients and small businesses who are more likely to prolong or forget payment, often without warning or explanation.

  6. LaToya-I’m not sure you’ll see this as it’s so long after it was posted, but I recently came across your post.

    The problem I have is the client who signs a contract (my standard is 50% down and the balance paid within 10 working days of submission of the project) and then totally ignore the due date. Most often I get back that their terms are 30 days – that’s not what you signed.


        • The first step is to lose the lack of confidence about it. Remember, you’re the business owner. You set your rates. You set your payment terms. No one else has the right to do that unless you hand it over to them. When you remember that you’re in control of that aspect of things, it’s easier to ask for what you want.

          Beyond that you just build your platform and network so clients come to you — best way to build a waiting list, and once you have that demand you can set any payment terms you want and clients either take it or leave it (most happily take it). The quickest way to do it is to focus on SEO to drive clients to you via search.

          Even if you don’t have too much demand where you’re comfortable turning folks away, you can still advertise those terms publicly. Many will take it without question (at least on the Web and business clients — magazines are obviously a bit different). Others might try to negotiate with you. If that happens, offer them a one-time offer of 50% up front, but make it clear that’s just a good faith effort the first time to make them comfortable, and then your normal policies apply.

          If you’re still not comfortable here’s another way to do it. Split the project into 2 segments. Charge the first half up front. charge the second half at the halfway point for the project. They get to split up the payments, and you’re technically still being paid up front before each portion of your work.

          • How did I know I would be hearing from you. 🙂

            With the business niche I work in, it is very common to pay vendors after 30 days. A good number of my projects are bigger than articles-e.g., white papers, case studies. That’s where the 50% upfront started happening for me.

            I like the idea of the 2nd payment halfway through the project. I will say at least 90% of my clients meet the terms. It just amazes me when those who sign a contract agreeing to the balance of the payment with 10 business days, just ignore that term & when I follow up, state that their policy is 30 days.

            Thanks, as always, for the good advice.

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