 |
| [magnet attracing coins*] |
Freelancers wear a wide variety of hats ranging
from computer technician to CEO with signatory powers. Some of these roles are
more pleasant than others but all are important in their own way. One of the
key tasks that freelancers must perform but frequently avoid is bill
collecting. A business is not a hobby but instead a way to make a living. Thus,
collecting unpaid invoices is vital for economic survival. Granted, as simple
as it sounds, requesting payment can be rather complicated. However, with
proper bookkeeping procedures, a directed mind set and effective communication,
the check or wire transfer actually arrives in the account.
While lack of business kills many enterprises,
the failure to collect unpaid invoices bankrupts at least as many. Beyond the issue of the
moral justice of being paid the agreed compensation for the work, freelancers
are expected to pay their own bills just like everybody else. Given the effect
of the law of opportunity cost, i.e., you can only perform one task in a given
period of time (unless you outsource), not being paid is lost time regardless
of the reason. In other words, a person that does not care about payment should
either work pro bono, which is legitimate, or seek a salaried position, in
which case the employer handles the payroll. The midway position, ignoring
unpaid invoices, is economically untenable in the long term.
For freelancers, this task can become
complicated due to varying payment procedures, concern over customer reaction
and emotional impact. Payment terms in a global market range from prepayment
with some end clients to 90 days for some institutional clients. As small
players, it is difficult, if not impossible, to impose any payment specific
regime on customers, however reasonable it may be. Even 30 days is far from
universal. Moreover, communication regarding unpaid invoices has the potential
to create tension between the service providers and customer. Finally, putting
aside scammers from whom payment is clearly irrelevant, it is emotionally
disturbing when customers do not do “what they are supposed to do” and fail to
pay their invoice on time. Freelancer often prefer to wait another month before
raising the issue on the hope of avoiding an unpleasant situation. One of the
common sources of this discomfort is the embedded belief that bill collecting
is a dirty task to be assigned to undesirable types, like tanning in India.
While it is not rational given that a person chooses to become a freelancer,
this prejudice provides further fuel to procrastinate on this task.
The first key to financial success for any
business, big or small, is proper bookkeeping. Regardless of the means, a
designated accounting program or Excel, a freelancers must make it policy to immediately
enter all relevant information on a project, including billing date and, if
possible, expected payment date. Of course, once payment is received, it is wise
not to procrastinate in marking payment information, including the date and
receipt number, as it is easy to forget to do so later. With this information,
it is quite simple for a freelancer to glance at the three previous months and identify
which customers have failed to pay. Payment review ideally is a monthly task
concomitant with monthly invoicing The easier is to identify late payments, the more likely a freelancer will make
it a policy to check for them.
When turning attention to unpaid invoices,
freelancers must make a mind switch. They need to pretend that they are a clerk
objectively and unemotionally checking the books of another business. As
Detective Friday from Dragnet would say, just the facts. Given that vast
majority of customers, in my experience at least, fail to pay on time due to inefficient
accounting procedures, it is important they remember that they also find these
errors unpleasant. With that thought in mind, the freelancer needs to coldly create a
list of unpaid invoices with all the required information, i.e., number, date,
amount and project, if relevant. With list in hand, it is then the time to proceed
to the next stage, actual collection. Procrastination, like fear, is an
expensive habit.
It is important to remember that most payment delays are unintentional. Of course, if you believe that a customer has a policy of payment delay, it would be advisable to drop it as soon as possible. Therefore, requests for payment must non-accusative and provide sufficient information to allow a quick search by the party in arrears. In simple terms, it is important to allow the customer to climb down the tree in relative dignity and efficiency. Of course, before suggesting any payment in arrears, it is necessary to conduct a thorough search of the bank records to confirm it. My letter of collection states that I have no record of payment, not that that the customer did not pay. Furthermore, I actually apologize for the inconvenience, which makes it easier for the other side to apologize for not paying. I express no anger or frustration, merely the request to resolve the matter either by immediate payment or specifics of the actual payment that was made. My record is close to 100% on collection issues without any loss of customers. We both treat the matter as an objective business issue, not a personal dispute.
Fear is a great paralyzer. Choosing to become
a freelancer requires taking on tasks that are less comfortable in terms of
skill and mindset. However, good accounting, like good fences, makes for good
relations. By practicing proper bookkeeping, treating unpaid invoices as an objective
business issue and firmly but politely demanding payment, freelancers can
receive the due compensation for their work. After, it is a vital to render
unto freelancers what is freelancers.
How often do you review your payments? Click here to take a survey.
* Picture captions help the blind access the Internet.
Picture credit: Image by <a href="https://pixabay.com/users/pithonius-301639/?utm_source=link-attribution&utm_medium=referral&utm_campaign=image&utm_content=2972568">pithonius</a> from <a href="https://pixabay.com/?utm_source=link-attribution&utm_medium=referral&utm_campaign=image&utm_content=2972568">Pixabay</a>
No comments:
Post a Comment