Freelancing can be a risky business, and in an imperfect world, every new client is a potential risk. Because there is very little protection in terms of guaranteed payment for work, many freelancers have to take chances, or learn to spot potential risk clients. While contracts and various services such as joining the Freelancers Union may help you get your money in case a client doesn't want to pay up, the best option is to try to avoid putting yourself in a no-payment situation in the first place.
Initial Shock Over Rates - Clients who react poorly to an initial quote are fairly frequent if you deal with small businesses, but are something to watch out for. If a client thinks that your rates are ridiculously high and then does a complete 180 without any additional encouragement from you, they might be thinking that they can just skip out on the payment. In addition, if the client reacts poorly to your rates, you probably don't want to work for them anyway.
Location - While not always applicable, location often has an impact on whether or not clients intend to pay. Clients from economically wealthier areas tend to be more likely and more capable of meeting fees. Paying attention to the client's location, their English level, and whether or not they are in a country that uses USD, Euro, or GPB can help you to avoid non-paying clients. For example, if you are talking with a client in the Philippines, hiring you for a USD rate is incredibly expensive based on the local exchange rate ($1 USD is roughly 45 pesos) and they might not be able to afford your rates. There are many exceptions, but it is a good idea to tread carefully when working with smaller companies.
No Payment Policy - Asking about a client's payment policy can help you to identify clients who have an idea of how and when to pay you. Ask how long they take to make payments after receiving the completed project and how they intend to pay you. While this information is important, it is also a good way to ensure that they have thought it through. Many larger companies have standard payment policies of 30-90 days, but smaller companies may pay upon arrival, weekly, bi-weekly, or monthly. Get the details before starting the project.
Indifference - Unless the company is large or wealthy enough for money to not be an issue, then indifference is a red flag. If the company does not care about rates at all, they also might not care about actually sending you a payment.
Changing Attitude About Results - Finally, the biggest red flag from clients is attitude. Clients who drastically change their opinion on the quality of work at the final draft are usually looking for reasons not to pay. One common trend with non-paying clients is to express approval of initial drafts or outlines of the work, appear pleased with the results, and then express extreme dissatisfaction when it comes time to pay. Chances are that unless there were very major changes between the previous and final versions, the client is looking for reasons not to pay. If this happens, clearly outline that payment is expected no matter what, and refer to the payment policy from your contract.
Research the Client - Researching the client before accepting a contract is probably the most important thing you can do. Spending 10 to 15 minutes looking up a client on the Better Business Bureau or the Freelance Union's Client Scorecard can save you a great deal of hassle later. It is also possible to simply Google the client and check out any freelance profiles they might have. For example, Odesk allows you to see the client's feedback from previous contractors as well as their average paid rate.
Sign a Contract - While contracts are not always feasible with every client, they can help to ensure that you get paid. Small projects, or those under ten hours of work, are probably not worth the hassle of writing up and signing a contract, although this also depends on the amount to be paid. Most professional companies are willing to sign a work contract. Contracts allow you to press claims in small- or large-claims courts. They also give you the opportunity to outline everything expected from both yourself and the client. There are a number of free templates available online, but each contract should be customized for the business in question. The contract should outline what is expected from you, what is expected from the contractor, the payment details in numbers (hourly rate or project rate), upfront and milestone percentages, the payment deadline, and hopefully late fees. If the client requires an NDA, you can work that into the contract as well.
Ask for an Upfront Payment - Asking for upfront payments is not always possible because some clients may be wary of investing in a freelancer before receiving any work, but it definitely cuts down on employers who don't pay. Upfront payments of 20, 30, or even 50 percent are very common in projects, especially those with milestones. If you have a good reputation, good feedback, and plenty of references, then getting an upfront payment from a good client should not be too much of an issue.
Stop Working as Soon as a Payment Is Late - When you turn in work and payment has not been made by the times stipulated in the contract or payment policy, it is time to stop work. Even if you have deadlines, it is important to wait for payment before continuing work. Send the client a message to explain that you are pausing work until the invoice is paid. If the client lets you know that the payment will be late with specific and believable reasons, then you can make an exception; otherwise, try not to work for too long without payment milestones being met.
Send Invoices - Invoicing your clients through a professional system is important for any freelancer. Not only is it useful at tax time, it also reminds clients that they are supposed to pay you, and affords you an easy way of filling a claim if they do not pay. Sarah Horowitz of the Freelancers Union recommends sending each invoice by snail mail and email, and placing a courtesy call to alert the client that you have sent the invoice. Freshbooks and Quickbooks both offer invoicing services for freelancers.
Be Persistent - The biggest mistake you can make when a client does not pay is to just give up. In some cases the reason for not paying is simply forgetfulness. Send a reminder for the invoice, send the invoice again via snail mail, and call the client. Remind them that the payment is due and then get a date for the payment.
Have Your Lawyer Send a Letter - If reminding the client about payment does not work, have your lawyer send them a letter. This will cost you money, so it may not be a good idea for a very small payment, but usually it is enough to scare the client straight. If you do not have a lawyer, consider getting one, or send a formal letter to the client explaining that you will take them to court if they do not pay.
Small Claims Court - Unfortunately small claims court is not always an option, especially for international clients. Small claims vary with limitations of up to $2,000 and $25,000 depending on the state. A small claims court can help you get money from an unpaid contract, but it is difficult or even impossible without a signed contract. You also have to pay attention to lawyer and court fees to ensure that they do not exceed the amount of the payment, although the client should pay those if they lose the claim. If the client does not show up to the hearing, you are automatically awarded the case.
Spotting clients who don't intend to pay isn't always possible, but you can reduce risks and improve your chances of getting paid by paying attention. Usually, if you have a bad feeling about a client, they don't treat you professionally, or they ignore questions about money, then you should definitely steer clear. Since a contract is the best way to pursue payment if the client refuses, it is also important that you sign one with every major project. Finally, it is always a good idea to brush up on local small claims law in your state before accepting larger projects so that you understand what you can do if something goes wrong.
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