How to get your clients to pay on time
Hey friends and welcome back to the Alex Makes VR podcast. In today's episode, we're going straight for the money shot. That's right, we're talking about when should you charge clients? Aka when do you ask for the money? When do you get the moolah? We'll talk about all of that whether whether it's upfront afterwards, as soon as you deliver, or 30 days after we're going to talk about all of the money myths, and to get you started with charging clients in this episode.
This is a full transcript of the podcast episode, instead you can hear me talk about in the episode here:
So money, the conversation of money, it fascinates me because so many people that want to get into the self employed or the small business space, people, like yourself listening, you might really want to be self employed and work for yourself but the thing stopping you is the uncomfortableness about having to talk about money. The very fact that you're going from being paid a lovely salary, you know exactly how much you get paid, it gets paid in exactly the same time, every month, all of a sudden, now you're in charge of having the conversation with clients about how much money you're going to charge them, and when they're going to pay you. And often, more times than not, you're chasing them because they're late on payment. This is the number one thing that I see people get a bit anxious about, there's a lot of brilliant creatives out there listening, I'm sure you're one of them, that just have the skill set but are scared or nervous about the notion of having to understand that side of things, having to have conversations about money, knowing what payment terms are, etc. And that's the thing that often stops people and I don't want that to happen to you, you beautiful being you because you deserve to have the freedom and the excitement of working for yourself if you are so inclined to do so because when you're an employee somewhere, all you've got to understand is, the only difference is that the person above you is having the money talks, not you and you're being paid maybe a fifth, if that...well, a fifth, I've literally picked that fraction out of thin air. But if you work for a massive company, obviously you're being paid such a tiny, minuscule amount, compared to the amount of money that the head of that company or the head of sales, whatever is charging other people. Basically, the more comfortable you can get with money conversations, the more the bigger percentage of the money pie, you will get essentially, not always, but generally speaking. So...wow that was a tangent.
Let's get right back on track, when do you ask clients for money? So let's simplify that because I don't want you to be one of those people that is scared of having conversations about money. It's fascinating to me that people find it really taboo to talk about it. I think there needs to be more transparency. So let's talk about it. Let's talk about, you're just starting your freelance business. For the sake of argument, I'm going to say you're a 360 videographer, and you approach a business and you've gone through this pitching process. You were nervous, but you smashed it, you're exhilarated, they've committed to spend £5,000 with you on their first 360 video tour, whatever it might be. So 5000, excellent, they've agreed to it fantastic, they might ask you then what your payment terms are. If they don't ask you what your payment terms are, you need to initiate that conversation. As soon as you have agreed on a price, you need to discuss payment terms, you can do this really simply, you can either say something to the effect of if especially if they're a bigger company, there's no point in you putting your payment terms out there, because they will have set payment terms that they can't get out of. So you could either say if you're working with a bigger company, you can say, you know, once you've confirmed that price, brilliant, can you outline your payment terms for me? Usually mine would be XYZ. That is generally what I would do. Even if it's like a smaller business, you could say yep, great, so we've agreed on this price, just so you know, my payment terms are XYZ, let me know that's okay. Before you do any work,
any work, I really need to hammer this into your skull because this breaks my heart, the amount of people get this wrong. Before you start any work you need to have in writing aka an email, preferably someone confirming the payment terms. The reason this is important is, if you leave that conversation, to when you've already started the work, you've lost your leverage. And don't get me wrong, like I know even my brother bless him, my younger brother who's an animator by trade, he still runs into this where it's a last minute rush job and he's been contacted on like a Thursday evening and they need it by Friday evening and it so he just kind of like rushes it through without talking about payment terms and then it becomes a painful process afterwards of having to just kind of back and forth on because all of a sudden, of course you've already started the work. It's not really much skin off there. Now if they like, take 60 days to pay you, or if they're like - oh, yeah, sorry, I need to get you talking with finance, blah, blah, blah, blah, blah. So the reason I say get your payment terms confirmed upfront is because then you both know where you stand. Okay? So you could say, for example, these are my standard payment terms and great five grand, brilliant, can't wait to start work with you. Just so you know, my payment terms are a 50% deposit upfront and that needs to be paid before production starts. And then the 50% balance is due within 14 days of delivery. Okay, so that's my personal payment terms. 50% upfront, as in, as soon as we've confirmed, great, the invoice goes straight in for 50% that I do not start work until that 50% has been paid. Okay?
Now, this can sometimes cause a bit of a headache, because if you're working with a bigger company, their payment terms will usually be 30 days or 28 working days, once the invoice has been received, so you really this is, again, why the conversation of payment terms is really, really important upfront. Okay, so generally speaking for me 50% deposit upfront, great they've paid it, we go through the process of production, I will always always stipulate the amount of amends that are included in that price. So that's part of the budget conversation, this isn't really a payment terms conversation but let's say it's £5000 and that includes two rounds of amends only, anything outside of that is charged additionally. So charge the deposit. Great, they've paid it, we've done production, fantastic. We've been through two rounds of amends, everyone's happy the project and it is signed off when you deliver your final files. However that might be whether you're delivering an mp4 or an SDK, or it might be stills or it might be a virtual tour, whatever it is that you're delivering, once you deliver that final asset you also in that email or in the same moment that you're sending them the final files, you send them your balance invoice. So deposit invoice, and then balance invoice. In that balance invoice you will say on the invoice and mine usually is next to the total...you will say when that invoice is due, okay? So make sure you put a date on the invoice, you can either put a date, or you can say due within 14 days. So for me personally, I always put the actual date. So the total is £5000, invoice is due on the 14th of February with thanks, something like that. So, right up top, you've had the conversation, you know when you're gonna get paid, they know when they are expecting to pay you and you can do all sorts of different things as well. You could, you know, give incentive to people to pay sooner, I've seen people do that where it's like if you pay before like within seven days, for example, or if you pay upon receipt, invoice that is due upon receipt means that as soon as you send that invoice it is due. So the second that someone receives it, they should then pay it aka within kind of 24 or 48 hours. So you could offer a discount, you could say, you know 5% off, if you pay within three days or something like that, you could do that if you wanted to.
That's my preference anyway, I do the the split, the 50% of top 50% within 14 days of delivery. Now what you could do is, if you are working with slightly smaller clients, because I should preface that those are my standard terms, but I tend to work with bigger companies that have their own terms, in which case, you don't really have a choice you just kind of have to trust them but usually the bigger companies have much more procedure in place and you've actually contracted, you know with the payment terms in there so you know that you will get paid. So usually, a bigger company might not necessarily be able to get you that money upfront, although you can still charge for it and it will just kind of come through 30 days later and then once you invoice for the balance that then will be paid 30 days after that as well. But yeah, anyway, coming back to it. So, if you're working with really small companies, which I imagine you will be if, this is your kind of first foray into freelance life. What you could do is, you could say, obviously, I would still try and get a deposit upfront, I feel like that's just good practice, that's just shows kind of goodwill, it shows, and I don't know...it does feel a bit more professional, whether or not that's just a kind of placebo effect. It's just, I think that you probably should be charging a deposit that shows that the client is committed to you, there's not going to be a big hoo ha, if production goes absolutely tits up, you've at least got 50% of the money. So I would always recommend that you do try and charge a deposit but if you're working with a really small company, or it's a really small job, it's you know, a half day shoot, and they just want the raw files from you. So you know, I don't know how much you would charge for that 300 400 pound or dollars, something like that? With that kind of money, maybe you don't really need a deposit and it's such a quick turnaround. For example if you've spoken to Terry on Tuesday, and he wants me to come in on Thursday, chances are, he's not going to be able to pay a deposit and it's not really worth it for that kind of money but I would still get them to commit to payment terms in an email, just so legally, you've got some kind of come back, if for some reason, they don't pay you. So, you know you say - great Terry, I'll come and do your half day shoot and deliver the raw files. That to confirm that's gonna cost you $400. My payment terms this, this invoice will be due before files are delivered. So what you would do in this process, and this is something, again, that I've advised my younger brother to do in the past, and it's worked really well, it's really motivated his clients to pay him and make sure that they're committed to that. And so in this instance, you would go, you would do your shoot and then what you would do is...because in this instance there aren't any amends because you're delivering RAW file but what you would do in that scenario is, you would say - fantastic working with you, I can send you some watermark files if you'd like to check them before and if not, here's the invoice and you would just put on the invoice, invoice due upon receipt, aka, you ain't getting the files unless you've paid my bill sunshine. So that's another way of doing things. So you don't necessarily have to charge a deposit but you charge once you've done the project. But before you deliver the files now, if you do have amends to do or if you and rightly so, if the client wants to see some of the shots before they pay the invoice, that's absolutely fair. What I would suggest is that you watermark everything and potentially send a lower resolution version of whatever it is and when you watermark make sure that you watermark across the middle of the image, don't put it in the corner because it's too easy to to crop out. So you finish the shoot, you send the watermark files over. Once they've confirmed that yes this looks great, then you send them the invoice. And as soon as they paid the invoice, that's when you deliver the files. The worst thing you can do, and again, loads of people do this and it's totally fine, If this is something that you have done, or if this is something you're doing currently, I would just urge you, I would urge you to kind of change your practices, as of hearing this episode...a lot of people won't charge a deposit, they'll just kind of agree everything with the client without kind of confirming payment terms or anything. They'll do the job, they'll deliver it they'll have gone through however many rounds of events because they haven't said how much they should be doing and then they give the invoice in hoping that it'll just be paid whenever but they don't put a date on the invoice and then that invoice conveniently gets lost by the client or it gets pushed back. Or they're like -oh, we actually have this other thing come up now. So like, can you just like, can you tack that invoice on to the next invoice and all of a sudden, you've gone two months without any money coming in, which is a complete nightmare. This is why freelancers and small businesses need to have solid payment terms and this is the thing that really really frustrates me with clients that don't pay on time. It would be the equivalent of someone saying - I'm not paying your salary this month, because I'm not going to have cash or oh yeah, I've just misplaced your salary. So I'm going to pay you next week. That's right.
There are laws in place that are there to help you safeguard your rights to be paid on time. So you can legally charge a late fee if they don't pay on time but if you have not outlined your payment terms upfront, you have no leg to stand on. Because how are they supposed to know that you were expecting to be paid within five days? Do you know what I mean? So let me recap because banged on about for 15 minutes about payment terms, which to me is very exciting, but I'm not sure how many of you are still awake. Who needs calm and sleepy stories? When you've got the Alex Makes VR podcast!
So let me run you through it again. I would recommend you've agreed on a budget for a project. Yep, we're going ahead. Excellent. Everything's been confirmed. Okay. So you send an email. And in that email, you say - just so you know, these are my payment terms. It's 50% deposit upfront, followed by balance invoice, within 14 days of delivery, or 50%, deposit upfront and 50% balance invoice, paid upon receipt. I will not release the final files to you until that invoice has been paid. Or you're going to do the job without a deposit and you say - Just so you know, my payment terms are XYD and I will invoice once the job is complete but before I deliver the final files to you, is that okay? Let me know if that's okay.
If you're working with a bigger company, let me know if that fits with your payment terms or let me know if you know, can you confirm that this is okay? Basically, you need a written verbal agreement back that's great or no, actually our finance works on 30 day terms. So can you change that to 30 day terms...Blah, blah, blah, blah, blah, you need all of that in writing before you start your work.
Okay, I'm not going to bang on anymore. But I hope this was helpful. It really is super simple but I really do think and treat yourself as if you were an employee, and you were expecting to be paid on time because you deserve to be paid on time. You deserve to be paid for your services, you deserve not to be messed around but some clients, weirdly, especially the smaller ones, will try all sorts of tricks to get around it. But if you've agreed the payment terms upfront, and they've agreed to it, then they've not really got any comeback because you've agreed everything. There's nothing really that they can say down the line to be like -oh, hang on a second, I wasn't expecting to pay this invoice before the job but also in response, you could say - yeah, I'm really sorry, I don't do jobs without payment terms agreed upfront anymore.
So if there are like special circumstances, or there's something that's a different scenario than the ones that I've outlined, get in touch with me and I'm more than happy to offer you some advice. If it's like a very specific scenario that I haven't kind of thought through on this podcast. But I hope that helps you, I hope that you really do. Just go for it. And don't let the conversations around money and don't let these kind of what can be seen as quite big scary things to have to overcome and don't let them hold you back. I promise you, it is so much easier when you just start going. And actually, people really respect the professionalism of someone that kind of outlines this stuff up front, the end of the day, the client just wants to work with a professional, they want a good service, they want a good product, and they want to have their hand held by you, taking the initiative and saying these are my payment terms. So don't be scared and charge for your work. Make sure you get that deposit. If you're doing projects, any more than like £1,000 or even less, to be honest, it depends on how long it's taking, please get a deposit invoice. It's so important and that's it. Business guru, Alex Rühl, signing off. I should also say that my advice in this podcast is totally anecdotal and should not be taken as any kind of financial or legal advice. This is purely from my own experience.
So please do, as a disclaimer go get legal binding advice if you feel the need to. My advice is not a substitute for that but it's just anecdotal. You'll be fine, get cracking and I will speak to you in the next episode.
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