A Sure Sign You're Not Getting Paid
Susan Kirkland
There are many signs to look for when things have gone sour in a creative working relationship. We won't be covering obvious signs; like an invoice that's gone past due for more than 120 days or that your client's office was emptied by a moving van headed for state lines the day after the job was delivered. When people resort to avoidance tactics, the game's over and you don't need my advice to see you aren't getting paid. Likewise when your client won't take your calls, it's a sure bet you won't be paid. The nine signs that you aren't going to be paid are more subtle -- little things your gut picks up on but your sentimentality convinces you to ignore. Don't be a party to denying your instincts -- learn to trust yourself.
Memorize these signs and train yourself to go into a cold sweat when you see one. When you sense something is wrong, decide how you want to handle it.
??? How will you confront your client without alienating him?
??? Is it worth the trouble or should you let things ride?
??? Do you like your client enough to let it go if he doesn't pay?
Sometimes it's worth it to get a handle on your feelings about these issues before you decide on a plan of action. Unless you're Spock from the planet Vulcan and your emotions are completely in check, never broach the subject until you have a plan of action in advance. From personal experience, I can tell you it's almost never worth the trouble of suing someone you've worked with for years and who has suddenly fallen on hard times. Be generous of spirit enough to realize that over the years, you've made enough money on that client to ignore a default on a couple of jobs. You'll recognize time tested, dead-giveaways in the stories that follow. Learn and apply the signs and signals. History has shown that no matter how experienced or adept you are at reading human behavior, these nine signs will sneak up and bite you before you know it.
The first sign: Delay or the check is in mail. Even when you do a fair days work, there are people out there who revel in getting something for nothing. They can't be avoided. Their only goal is to get a deal (either by wheeling and dealing or just plain stealing) or get something for nothing. And it's surprising the number of people who pride themselves on delaying payment for as long as they can. Talk to anyone who works for the gas company and they will tell you some of the richest people are the hardest to collect from. Human behavior gets wacky when it comes to money, so expect the worst when collecting from individuals. By and large, companies have professional staff who handle invoices and unless the middle manager is sadly disappointed with the service you rendered, your invoice has been approved and sent to accounts payable for payment processing. But a professional accounting staff does not guarantee payment by any means. Delay of any kind can be a dead giveaway that trouble lurks behind the scenes.
The work I did for one big city architectural firm that designed a large part of downtown Houston suddenly started slow-paying invoices that used to be paid like clock work at thirty days. Now they were dragging on to forty-five and sixty-days. One job in particular was a spiral bound calendar on heavy stock, each month heralded with a line illustration of one of the firm's projects. At sixty days, I took a walk with one of the junior interior designers and he confessed the firm was seconds away from declaring bankruptcy. He went with me to the accounting department and my invoice was paid immediately when I offered them a 10% discount for motivation.
When the word bankruptcy comes up, speed is of the essence. Creditors have to file a claim and are paid in order of importance. Our Uncle Sam is always first, the attorneys and trustee are second, and any secured debt is third. Creative services are unsecured debt, so plan on getting in a long line. If you are number two hundred and fifty seven on the list of unsecured creditors, you'll be lucky if you get anything except the costly opportunity to file a claim. So don't wait before you pick up the phone and speak to the person you worked with on the project.
Sometimes the right person will have some pull with the powers in charge and can force a pay out. Be willing to give a small discount for quick payment and take the check to the payee's bank the same day you get it. Hopefully your relationship is good enough to warrant extraordinary efforts on your behalf. Keep in mind, any payments received within 90 days of a bankruptcy filing are subject to review by the trustee assigned to the case. This usually only happens if there was a large, noticeable outlay of capital paid to a single creditor. Ordinary operation expenses rarely attract attention.
If you suspect bankruptcy but have no confirmation, here's a tip: Sudden rush to project completion and doubling up quantities on standard orders is usually to insure sufficient stock to continue business long past the time a trustee freezes a company's bank accounts. Do a credit check or quietly ask around for signs of trouble like disconnected phones, sudden layoffs of long-term employees or downsizing office space. If the person you usually work with suddenly takes a job with a competing firm, this can also be a sign of trouble. Keep your eyes wide open.
Frequently, delay is by design. I did two small jobs for a string of big city physical rehabilitation clinics. I made sure they had all the right forms and were billed in triplicate and waited for the check to roll in. After forty-five days, I called the company. I got an automated system where I could key in my invoice amount and find out where it was in the system. Guess what? It wasn't in the system. I called back and spoke with the manager of accounts payable who told me she couldn't process my invoice until I had a vendor number. To get a vendor number, I had to fill in a form, mail it and wait until they had time to enter it. Another month went by and no check. I called and asked for my vendor number, keyed it into the system and still the two month old invoice was not in the system. I spoke with the same manager again and was told they had my invoice, but it had not been approved by the local manager. When I called the local manager, he reassured me he had approved my invoice the day he received it and that he would call the accounts payable manager immediately to correct the situation. She faxed him a copy, he signed and faxed it back. I waited for the check to roll in and after another fifteen days, I called the accounts payable manager. When I reminded her of the faxed approval, the vendor number delay, the W-9 delay and how long past due the invoices were, she stopped midway through her next excuse and said she would have to look into why the invoice had not been paid.
When the check came, it was for only one invoice so I had to start the whole process over again. I eventually got my payment, but the small printer and typesetter who billed direct gave up and wrote it off. This is when you have to listen to your instincts and trust your gut reaction that the delays are intentional. Businesses that are slow payers are generally bad customers.
The old adage that if the office personnel are rude, the doctor probably is, too, is true. This much delay in paying an invoice is by design not accident, and is dictated by senior management to restrict cash outlay to a minimum. Unless you have the fortitude of a Russian shotputter, avoid companies like this no matter how nice the assignment. If you don't, you'll end up spending more time in accounting functions than you do creatively -- and that's a drag. If you want to keep this client in spite of the repeated delay, do what a near-famous 3-D illustrator does, "After repeated instances of late payment, I systematically add an agony factor to each invoice, sometimes as much as 30% to cover all that time I know I will have to spend trying to collect. That hurts them even more because I always give clients a 3% discount for early payment. It would be easier if they would just take advantage of that."
Most companies pay their bills on time and counting a few big ones among your clients quiets any insecurity you may have regarding where your next job is coming from. When billing a big company, it's always best to send the invoice to the person you did the work for; that way they know the bill accurately reflects what the two of you agreed on prior to commencing the work. If they enjoy the service and quality you gave them, they will be sure to expedite your invoice.
The "unaffiliated individual" is a potential bad risk and if you accept work on trust, you can count on negotiating for a percentage of leftovers if the business fails. There are certain things you can do to make sure you don't walk away empty handed when accepting work from a start-up or entrepreneur. The first and most obvious, only work on a retainer basis.
One freelance writer I know has an iron clad contract that even spells out the number of revisions and the minimum amount of retainer she will accept for each project. She won't even discuss the project until all the paper work is signed. A contract sounds like a good idea until you realize it's still just a piece of paper. If your client defaults, you may have to hire an attorney to enforce the contract. A retainer puts the cash in hand before you spend any of your non-refundable time on the client's project.
How much of a retainer do you want? If it's an individual, ask for at least half ofthe total project cost in advance before any work is started. Don't be surprised if they balk. That's a quick giveaway that they weren't committed to the project anyway and they certainly aren't committed to paying you for your time. In fact, it may be a sign that they can't afford the expenditure at all; you may have exposed a con or something more innocent -- the wishful thinker. Be grateful for your own insight and run as fast as you can.
Another helpful backup in the quest for payment is a time sheet. Keep a time sheet for each project and review it with your client as the retainer is used up. Don't be a fool and keep working on a project when the retainer in your bank account has not been refreshed. Remember at all times that you are doing this for a living and that love doesn't pay the bills. Quick to compliment but slow to pay means only one thing�there's a snake in the grass.
A few more words about contracts: Many books and organizations advocate the use of these wonderful legal documents because they spell out the responsibilities of both parties, their limitations and their expectations. The problem is that a contract does two things just by it's introduction. First, it alienates both parties. By admitting the need for a contract, you've already established a lack of trust. Second, it automatically obligates you to buy legal services. No matter what happens to cause you to fall back on the contract to collect, you must pay an attorney to execute the contract, pay court fees, filing fees, etc. If you want to spend your time interfacing with attorneys and courtrooms; use a contract. Ifyou want to do design work and guarantee you'll be paid for it, ask for a retainer up front.
Regards,
Susan Kirkland
About the author
Susan Kirkland is author of Start & Run A Creative Services Business a new book that shows you how to Translate your creative skills into cash ; Build a loyal client list to lock in repeat business; and market your creative skills worldwide. Learn what to do when from a veteran freelancer. Paperback: 200 pages; Publisher: Self-Counsel Press
�2005 Susan Kirkland, veteran freelancer and author of Start and Run a Creative Services Business, shares the secrets to finding and keeping clients, negotiating with vendors, protecting yourself from scoundrels and scalawags--a valuable resource for students and seasoned pros. For additional information visit www.sdkirkland.com
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