Clients who pay on time or early shouldn’t be a cause for celebration in freelance circles, but they often are. Of course, clients should always pay on time, but it’s also down to you, as a freelance business owner, to ensure you have processes in place to help yourself get paid promptly and that you are pricing your work correctly.
Your payment processes and pricing will very much reflect your confidence in your ability to deliver results, so if the money chats feel awkward, just remember it could make you appear unprofessional or uncertain. Clients want to be led, and they want to work with a self-assured freelancer. If the client avoids discussing budgets, you should consider that a big red flag.
Things for freelancers to put in place to ensure you get paid on time
- Have open money chats with your client from the beginning, giving quotes with clear deliverables and revision limits, talking about your payment terms and finding out who the point of contact is for their invoicing.
- Communicate with the person responsible for paying invoices before you start work to find out what they need from you to pay an invoice on time. Sometimes you will need to be a registered supplier on their system or use specific details on the invoice—you don’t want to be finding this out when your invoice is already overdue or be sent around the houses.
- Make it your policy to get full or partial payment upfront.
- Get a PO number.
- Get business insurance from a company like With Jack to remove the ‘what if’ anxiety and be eligible for free legal advice if anything goes wrong.
- Send every client a contract, and don’t start the work until it’s signed.
- Have a late payment process which involves chasing early, picking up the phone and charging for late payment.
- More often than not, it will be an innocent mistake that your invoice wasn't paid, so don’t let it fester. Be friendly and chase as soon as it’s overdue. It doesn’t need to be scary; it’s part of business.
“If you have 7-day terms (for example), many big organisation's finance teams will only pay on 30-day terms, and rarely will they change their terms for a freelancer. If you can’t get a company to pay upfront, you could invoice up front, and then, hopefully, by the time you’ve done the work, you won’t have to wait as long to get paid. Don’t be afraid to charge for late invoices. You can charge a late payment fee of £40 and interest at 8%.”
- Use payontime.co.uk to calculate late payment fees and get letter templates and advice. The Late Payments Act says you can charge even if it wasn’t stated on your original invoice.
- Send your invoices quickly to the right person and include your payment terms in the cover email.
- Check that your invoice has all your bank details on it and that they are 100% accurate - your bank name, the exact name as it’s written on your bank account, sort code and account number.
- Thomas Higgins lawyers will send a late payment demand letter on your behalf for £25+VAT.
- Consider having different payment terms for different clients.
- Don’t work with clients who throw up red flags.
How to work out what to charge as a freelancer
If you look at any freelance groups online, there will often be a freelancer asking ‘should I charge more?’ ‘Yes!’ comes the resounding cry, ‘you are worth it’, ‘put your rates up now!’. And as well-meaning as this advice is, it’s not always helpful as the commenters don’t have any context. Maybe the freelancer isn’t good at what they do, or they’re unreliable. Only you can calculate what to price your work at as there are so many variables.
Choose your target market wisely (and richly)
Having a niche as a freelancer is a good idea so you become memorable and know where to target your marketing and training. You don’t want to be everything to everyone. But when you choose a target market, do a bit of research as to whether the industry generally has budgets to spend on freelancers like you. Targeting a price-sensitive or low-budget client base is the first step to not getting paid well.
Consider value-based pricing
Value-based pricing, or VBP, is the concept of pricing based on the value you deliver for your client, not charging by the hour or day for your work. It can only be applied to certain projects and assumes a more senior level of experience, but it’s good to consider that you needn’t charge purely based on the time something will take you. It would be ridiculous really, as the better and faster you got at something, the less you’d be charging.
A simple calculation
Accountant Claire Owen-Jones provides this simple calculation to work out your pricing as a freelancer.
- What salary would you be happy with if you were employed?
- List all your expected business expenses.
- Write down how much your largest piece of equipment would cost to replace, and then double that figure.
- Add your salary figure to the numbers in steps two and three. This is your total turnover (sales invoices to clients).
- Work out how many weeks of holiday you want. If it was four weeks, divide your total turnover by 48 weeks to get a weekly target.
- Divide that by four to get a daily target (leaving at least one day a week for non-chargeable work).
- Divide that by seven (or however many hours a day you intend on working to get an hourly rate).
Do a cash flow forecast for your business with your predicted monthly income, and then go back each month to fill in your actuals so you can track how you’re doing and spot any patterns or concerns.
If in doubt when quoting, ask yourself if you’re motivated to do your best work at the rate you charge. If not, it’s probably too low. Sometimes, pricing simply comes down to what you’re willing to charge for the work and what the client is willing to pay, but there is often room for negotiation. Don’t forget it’s just as likely a client will come back and say ‘Yes, please’ or ‘Our budget is XX, can you do it for this?’ than a straight-out ‘No’ and there’s nothing worse than realising you could have or should have charged more.