Clients Who Want You to Pay to Get Paid

Earlier this month, Freelancers Union pointed to posts talking about NBC Universal and Time’s practice of asking freelancers to pay a portion of their invoices in order to get paid in a timely fashion.

So, rather than waiting the typical 60 days to get paid by Time Inc., for example, you could let them take 4% of what they owe you and get paid within 3 days. Instead of waiting 75 days to receive your owed wages by NBC Universal, pay them 2.5% of your wages, and you’ll get paid in a mere 15 days.

There are two ways to think about this issue. The first is from the point of view of big companies with thousands of contractors: it’s not unheard of for big companies to get a break on pricing if they agree to turn around payments quickly — and for many big companies, turning around an invoice in under sixty days is a minor miracle worthy of applause. For most large companies, getting a rush payment of an invoice takes extra resources so why shouldn’t they get a discount on the price in order to do so?

Then there’s the point of view of the freelancer. If a freelancer submits an invoice, it should be paid in a reasonable amount of time — and ‘reasonable’ should take into consideration the fact that freelancers don’t have the steadiest of incomes. And even the thought of getting less the amount actually on the bottom line of that invoice is painful.

I’ve spent the better part of a week trying to decide why I just don’t feel as angry as most of the commentors on Freelancers Union’s post seem to be. Maybe I’ve worked in industries where net-60 (payment 60 days after receipt of an invoice) is considered normal. Maybe it’s because I’ve been known to offer my clients a discount myself if they can pay immediately after receiving my invoice. Maybe it’s because I’m used to getting paid through PayPal and I’ve raised my rates so that unexpected fees aren’t a problem. Maybe it’s because I won’t even start on a project if I don’t have the timeline for payments spelled out in writing.

I don’t have a problem waiting 60 days for a payment — as long as I know from the beginning of the project when to expect my payment. I actually get a lot more irritated at the idea of freelancers willingly giving up a chunk of payment just to get their money early.

If you’re faced with a client that requires you to jump through hoops in order to get paid, you don’t have to sweat it. Instead, a better approach is to raise the rate you charge so that you can absorb extra fees, offer a discount if appropriate and be adequately rewarded for that extra wait for your paycheck. It doesn’t have to be a big change, either. In many cases, five percent would more than cover it.

4 Comments

  1. My first thought was anger, but you’re right actually. I guess I had just gotten used to working with small businesses (my target market), though I agree whenever I work with someone larger for a project I’m always boggled at the paperwork and other array of red tape.

    Think the bottom like, as you have it, is that it doesn’t matter what the fees or other bells and whistles are, but that you agree in advance WHEN and HOW MUCH.

  2. thursday   •     Author

    @Andy, I definitely get irritated when a client changes the terms of the contract out from under me. It’s happened to me in the past and it looks like it will happen again at the end of this year. I’ve have a simple approach to those clients: I get rid of them. I don’t need the hassle and the changes are never in favor of the writer.

  3. Alejandro   •  

    I work with the American Market from Argentina , and generally get paid with paypal, so i have around 10% that i loose bringing the money to me, paypal charges 4% to process credit cards, and then there is all the hassle of bringing the money to Argentina, that’s another 5% approx.
    So after learning from my first experience i just put 10% on top of my original quote and offer them a discount if the send the money via Western Union.

  4. thursday   •     Author

    @Alejandro, It certainly makes sense to build those fees into your contract. I’ve worked with clients who insist on using PayPal before, but have no interest in covering the cost of doing business that way. Having a little more margin on your estimates makes it easier to absorb those costs.

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