Sunday, November 21, 2021

Render unto freelancers what is freelancers' or the importance of being paid


[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.

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* Picture captions help the blind access the Internet. 

Picture credit: Image by <a href=";utm_medium=referral&amp;utm_campaign=image&amp;utm_content=2972568">pithonius</a> from <a href=";utm_medium=referral&amp;utm_campaign=image&amp;utm_content=2972568">Pixabay</a>

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