Don't Count Your Checks Before They're Cashed

One of the things that keeps me out of financial trouble is spending only the money I have on hand. Call me skeptical, but I avoid spending freelance money before I actually have it, even when I’ve already done the work. When you’re a freelancer, you can pretty much count on something going wrong with payments at any given time. Here are some rules I live by when it comes to payments.

Clients can cancel projects anytime.

I have several years of experience working with recurring clients – the ones that have weekly or monthly orders. In all those years, no client has given much notice when they stop the project. One day, I get an email, “Hey, just want to let you know that I’m not ordering any more articles as of now.” And just like that, the money for that project stops. The first time it happened to me, I was devastated because it was a client that made up 50% of my income. But it only took that one time for me to learn that you can only count on the money you have right now (and that no single client should count for so much of your income).

Don’t spend money before the project’s done.

I haven’t had a client cancel a project after the deposit has been paid, but I know it’s a possibility. So I never spend a deposit before the work has been completed – or at least as much work as the deposit covers. If the client were to cancel before I’ve started the project, I’d refund all the deposit. I’d have a hard time giving a refund I’ve already spent the money.

I’d say it’s ok to spend as much of the deposit as you’ve earned by working on the client’s project. I hired a crappy lawyer once who did nothing for my case. When I asked for my deposit back, he sent an itemized list of things he’d supposedly done on my behalf (e.g. $45 to write a letter) and a bill for $90. Not saying that you should charge your clients for thinking about their projects, but if they cancel after you’ve actually researched and written something for their project, then you should be compensated. Clear up problems by communicating this policy in advance and keeping track what of your work until you’re finished.

Clients don’t always pay on time.

Payments won’t always come when you expect them to. That you can count on. Invoices get lost. Accounts payable is slow. Bank systems go down. Paypal accounts get locked. With any given payment, any number of things can go wrong. I try to avoid a situation where I’m depending on a specific client’s payments to cover an expense, especially an immediate expense. That way, I have time to push them for payment before it has to escalate to harassing for payment.

The reality of freelancing is that things can and will go wrong with payments. To survive as freelancer, especially full-time freelancers, we have to manage the risk of money issues and plan accordingly.

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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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