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Many freelancers feel passionately about what you do. But ultimately, if freelancing is your full-time job, then getting paid in a timely manner is essential if you want to sustain your career.
There are countless ways to get paid as a freelancer, including payment portals, cash, check, wire transfer, and credit card processing services. Each method has its own advantages and disadvantages, so it's important to weigh your options and determine which makes the most sense for your business.
In this blog, we explore the best way to get paid as a freelancer depending on your business needs.We’ll also talk about best practices when setting your freelance payment terms.
Setting clear payment terms helps avoid confusion and misunderstandings between you and your clients. It also helps you establish a professional relationship and build trust.
Clear payment terms should include the:
Be sure to outline all of the above in your freelance contract and/or proposal.
Remember: your payment terms should be specific and easy to understand. To avoid any confusion or complaints down the road, set a time to review your contract (especially payment terms) with your client before signing.
Effective communication helps build trust between you and your client. Try to establish clear communication channels and expectations from the outset and be sure to hold up your end of the bargain. This includes discussing freelance payment schedules, deadlines, and methods of payment upfront. Freelancers should also provide clients with detailed invoices that clearly outline the work completed and any associated costs (more on that next).
Regular check-ins can also help ensure that both parties are on the same page regarding payment. Freelancers should communicate with clients throughout the project to provide updates on progress and to address any concerns or questions that may arise. After all, when a client feels that they can trust you to deliver quality work on time, they are more likely to pay promptly.
You can’t get paid on time if you don’t have an invoicing system in place. Lunafi allows you to invoice clients directly, and sends reminders to both parties so you can follow up on outstanding payments.
Simply select an existing client or add a new one. If you haven’t already completed that client’s profile, you will be prompted to give the basic information (such as company name, address, phone number). You can even assign clients a specific Reference ID or nickname.
From there, add your line items. For each item, you can set the quantity, price, and tax rate. Lunafi will remember previously saved items so if you charge for the same product/service, all you have to do is search.
Finally, assign a due date and schedule when you would like the invoice to be sent. Lunafi will take care of the rest.
If you already have your own invoicing system in place, or want to learn more about best practices, be sure to check out our blog all about invoicing.
Late fees can be a particularly sticky point, but they are an invaluable proactive measure for financial stability. Late fees should be reasonable and not excessive – best practices dictate about 1.5% per month of outstanding payment.
Ultimately, it’s your call as to when you enforce late fees, but if a client fails to pay on time, you should follow up promptly and professionally. Sending a friendly reminder before charging them is a good way of maintaininga positive working relationship. If the client still fails to pay, you may need to take legal recourse for late payments.
It's essential to keep accurate records of all communication and invoices related to the project.
If reminders and communication do not resolve late payment issues, legal recourse may be necessary. The first step is to send a certified demand letter. This creates an official record documenting the client’s nonpayment, and your attempts to collect.
The next step would be filing a small claims lawsuits, or seeking mediation. Oftentimes, lawyers will offer free counsel over the phone. Should you choose to pursue a lawsuit, you can refer to this handy checklist by the Freelancers Union to ensure you’ve got all your bases covered.
Remember: legal recourse should only be used as a last resort. It is important to weigh the costs and benefits of legal action before pursuing it.
Client nonpayment is out of your control. However, you can give yourself a financial buffer so that, should a client refuse to pay, you don’t find yourself in dire straits. By taking proactive measures, you can ensure that you have an emergency fund and avoid financial crises.
Creating a budget is an essential step in achieving financial stability. Start by tracking your income and expenses. Whether or not you have a business bank account (which you really should), Lunafi’s dashboard separates your personal and business finances so you can view your income and expenses at a glance.
Once you have a clear understanding of your finances, create a budget that includes both fixed and variable expenses. Stick to your budget and adjust it as necessary.
As a freelancer, you are responsible for paying your own taxes. This means that you need to account for quarterly estimated tax payments. Be sure to set aside a portion of your income each month to cover these payments to avoid penalties and interest charges. Lunafi conveniently calculates your estimated taxes (and tax savings) with each transaction so you can refer to the previous year or quarter to set a baseline.
Never rely on one client for more than 25% of your total income. This ensures that if one contact ends, you’ll keep your business afloat while you find new clients. You may also consider offering additional services or products to your clients. This can help you generate more income and reduce your reliance on a single client or project. You can also explore other freelance platforms to find new clients.
Overall, the best freelance payment method depends on your preferences and the client's requirements. No matter what method you choose, effective communication, clear payment terms, and efficient invoicing can go a long way toward ensuring you get paid on time.
So, choose the payment method that works best for you and leave the invoicing to us.
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