Did you know that most freelancers are getting stiffed by clients? Apparently, we are an easy target.
The Independent Economy Council surveyed freelancers in the U.S. who earn the majority of their income from 1099 work and also directly invoice their clients. Nearly three-quarters of those interviewed reported not being paid on time. This includes people who include a ‘Remit by’ date in their invoices.
The research showed that 59% of freelancers were owed $50K or more for completed work, with 72% of respondents saying they still have outstanding invoices yet to be paid by their clients.
AGENT TO THE RESCUE?
The other day a colleague of mine said he was working with a new agent, and 60 days after having completed a job he still wasn’t paid. Should he follow up or not, was the question, or would that be inappropriate?
First off: asking to be paid on time for services rendered is never inappropriate.
Paying someone late IS.
Right now we have two contractors in the house who are painting and renovating room after room, and we pay them at the end of every week. They bought the materials and did the jobs we asked them to do, so we’re not going to make them wait and beg to get their money. It’s also something we agreed on, prior to them starting the work.
In fact, all the service providers we use require prompt payment. You know, people like dentists, plumbers, and the guy who plows our driveway after a snowstorm. To me, that’s normal and appropriate. Some even want payment up front or right after the service was provided, such as my hairdresser.
Then why do clients think it’s okay to leave freelancers such as voice overs hanging for months? Why are they irritated when we remind them of our invoice?
MY ADVICE
This is what I told my colleague:
“An agent is representing you. That means he or she advocates and negotiates on your behalf. This includes reasonable terms of payment. I think it’s totally fine to nudge the agent to nudge the client. That way, you don’t have to play the bad guy and you can just focus on what you were paid for. So, make the agent earn the commission that comes out of your paycheck.”
If the job I landed didn’t come from an agent, I let my office manager do the nudging. Again, this will keep my relationship with my client clean and positive. I’m just the guy doing the voice over, and not the annoying person sending payment reminders.
Now, here’s some good news:
One follow-up typically results in payment!
According to the Independent Economic Council, for 37.3%, one follow-up to the client results in getting an outstanding invoice paid. For 23.9%, it takes two follow-ups, and for 19.4%, it takes three follow-ups. 19.4% say they haven’t had to follow up on any outstanding invoices.
NEW CUSTOMERS
Here’s another thing I learned during the thirty plus years I have been in business:
I always ask clients I’ve never worked with before, to pay up front. Trust must be earned.
If they refuse, I take it as a big red flag, and I won’t work with them (unless they come highly recommended).
Remember this: the only leverage you have with your clients is your work. You can send your completed job watermarked, and remove that watermark once the money is in the bank. Or you can decide to only hand over your recordings once payment has been received.
It’s always better to negotiate payment terms ahead of time, rather than after the fact. Don’t be too eager and agree to bad terms because you’re desperate for a job. Desperation is never good during negotiation. It encourages people to take advantage of you.
And remember, the cheapest clients are usually the worst to work with. I see paying reasonable rates as a sign of respect, and by charging respectable fees I automatically weed out the bad apples!
It always amazes me to see a colleague charge upfront. If you can do it, awesome!! More power to ya. I’ve never asked a client to pay in full upfront. But it can be scary – If they’re international, my only recourse is Interpol, haha! So I do ask that they pay 50% upfront if they’re new. However my contract is airtight and every independent client MUST sign it. I’ve never once had a problem client who has never paid. Note that I didn’t say that I never once had a “problem” client, haha! Just today a client came back to my “payment due reminder” email (I always send them a 10-day countdown advising them their payment will be coming due) with a note that I will get paid when they get paid, and that I should just be a good boy and waive any late fees. I cracked my knuckles and said, “uh, I don’t think so.” I copied the clauses from the contract that they agreed to which directly address payment terms and that payment needs to reach me BY the due date – not issued on or after the due date – received by me BY the due date, otherwise 1% daily late fees accrue. And one of the clauses specifically states that payment to me is NOT dependent on whether or not they’ve received payment from THEIR client. Nope. I also forwarded them the confirmation I received of their contract approval and reminded them the name of who signed it and the date signed. They replied “OK, Josh, understood. No problem.” GOTCHA!!! No wiggle room. I’m not waiting any longer for my payment than I have to, when you received your files instantly. A bulletproof contract works wonders. I even had Robert Scilimpaglia review it and he approves. Boom!
That’s an approach I can totally live with! I often tell my students that we teach our clients how to treat us. If you set up the rules in advance and they agree to it, they can be “enforced.” Unfortunately, too many colleagues are reactive, instead of proactive. They don’t act like independent contractors but as dependent contractors, allowing clients to jerk them around.
Excellent points, Paul. In my 60 years of business I have been stiffed. But, only a very few times. In my very early years I was young and naïve. But, I learned fast. I found out that if I didn’t pay my rent, phone bill, utilities, food bill, etc. on time there were dire consequences. I learned that since I was a “little guy,” the BIG GUYS figured they had the upper hand. So, at one point, I raised all my respectable and reasonable fees by 11%. I then offered my BIG GUY clients a 10% discount if they paid upfront. I was told Fortune 1000 corporations would never buy into that. But, they were very quick to realize in that first 30 days that was equivalent to 120% APR if they didn’t take advantage of my generous discount. I also charged late fees after the due date. They virtually all paid up front. My accounts receivable dropped to 5% in one month of what they were before I instituted that discount procedure.
Religious organizations – with no discrimination as to religion or denomination, all seemed to feel that since they were doing God’s work, I should feel the same. I reminded them that God helps those who help themselves. I required them ALL to pay up front or find another supplier. But, there was one VERY large Christian Network, to remain unnamed, but we all know it, that believed I should still be their bank. That’s when I learned the importance of reading the trade journals and the Wall Street Journal. They wanted me to give them 120 day terms. But, I knew from my reading they recently had been cut off by Ampex for spare parts for ALL their broadcast equipment, systems and media supplies (they were an all Ampex operation) – for late or non-payment. They wanted to buy blank audio cassettes in huge bulk orders from me. My final deal was that I cut down the size of their orders and I’d ship the cassettes, but I wouldn’t ship another order until I was paid for the first order. Interesting how they’d try to wiggle around that, but I always got my money pretty much on time, all the time.
And, then there was the local gov’t that needed a complete 3 camera, high-end, industrial – cable TV quality system – cameras, switcher, mixer, cables, camera pedestals, etc. I had a complete used system available that had just come out of an independent production house. It was about $60K at new value at that time. I could deliver it to them for under $20K. They were elated. Then they told me they would pay me in 30 to 60 days after delivery. I told them I needed a check when I arrived with the gear – or it would never leave the van. They said they couldn’t do that, the law didn’t allow them to pay that way. So, I said, fine, no deal. They could just go out and pay $60K for all new gear from someone that would play by their terms. However, I told them to watch the op-eds in the local paper when they got the new package. There would be an article, by me, telling the local taxpayers how and why they’re tax money just paid out $40K more than they needed to. Surprise! Surprise! When I arrived with the equipment, I went to the treasurer’s office and collected the full payment awaiting me before I pulled the gear out of the truck.
I always tell, new, unknown (I don’t care how big an organization or agency a client is) potential client, whether it’s a VO, audio or video production, custom equipment package, consultation or a book I was going to publish for the client, since the product or service has only one client, if they didn’t pay, I was left holding the bag with little recourse, but still had to pay my bills. So, it was money upfront or they could find another supplier. The ones who went to another supplier almost inevitably left that supplier hanging or stiffed. In my book, losing the project and potential client was less costly to me than investing my time, energy, resources and money into their project and then getting stiffed. We, as VO suppliers and small businesses are valuable resources and suppliers. If we don’t put that value on ourselves, the client won’t, either. Be creative in your business finances. They are as important as your studio, equipment, talent and voice. Oh yeah! And, hold your agents/managers accountable. Make them earn their commissions.
Wise life lessons about the power of leverage, Ed. Thank you so much for sharing them!
I love this! Thank you for that insightful data and advice. I really enjoy reading your work, Paul.
I was curious – have you found including specific clauses or items in contracts to be helpful in preventing negative situations? Or do you find most troubles arise from people who display red flags from the get-go? One of my favorite quotes from Robert Sciglimpaglia is something along the lines of “contracts are there to keep honest people honest”.
Thanks Paul!
Thanks for asking. My Guidelines and Terms & Agreements are actually on my website. Every client has to sign off on them before we start working together.
Thank you, Paul – and Joshua and Ed. My wife looked over V1 of my booking form. She’s a contract lawyer, with a career’s worth of experience negotiating agreements between companies and vendors, and drafting the kind of “airtight” contracts Joshua talked about. She suggested changing lines asking about client payment preferences, to ones stating my policies – for much the same reasons you talk about. I love Joshua’s 50-50, and Ed’s 10%-off for up-front payment. For an unproven vendor like myself, I wonder what corresponding assurances clients would need… I imagine a good contract, along with a watermarked file? What process do you use for watermarking?
A good contract is a sign of professionalism. Having a wife who is also a contract lawyer is a smart business move!
Most VO’s still use emails as written agreements, and get in trouble after the damage is done )and complain about being stiffed).
In terms of watermarking, I tend to make small changes in essential parts of the script, such as contact information. I will also record that same but correct information in the same take, and save that in a separate file.
Once the client pays, I send them the correct version.
The only time I’ve had a client not pay was someone who booked through a pay-to-play… the end client was a tourism company, at the beginning of the pandemic, so I would’ve understood there being problems with cashflow, but no one ever even bothered replying to my emails or phone calls. It’s unbelievable that people can even run a business with that kind of behaviour going on.
And it’s so true about cheap clients being the difficult ones – my most lucrative clients are also the most friendly, easygoing, prompt-paying and understanding people, by far. It just shows what makes good business practice!
We are on the same page, even though we might not be reading the same book, Sumara.