Thursday, 27 December 2018

What Do I Do if the Client Always Pays Me Late? (Adapt!)

I'll give you a straight answer: adapt.

It's not worth fighting over.

Or stressing over.

Just adapt.

Shrug it off and adapt your business model.

Your business model is far more adaptable than your clients' habits.

You get more and better rewards from adapting your conduct than from trying to adapt your clients' conduct.

Payment leniency is like any other need you can identify in the market — once you identify it, respond to it and profit.

There's really no point insisting on feeling offended/cheated/breached against etc. etc. when you can simply adapt and profit. And with a smile.

Challenges bring opportunities. Outplay life by taking the disadvantages it throws at you and converting them into advantages, coming out on top and profiting.


That said, here's some analysis:

What do you stand to gain if you press the matter?

Off the top of my head, I would expect a blend of conflict, guilt, apology and risk avoidance. In effect, probably:

  • slightly faster payments but not always on time, and at a great energy/stress cost for the client that could be better spent
  • a more strained relationship, with less goodwill capital than you could amass by being 'reasonable' and lenient
  • a client less inclined to be forgiving when it's your turn to get late or otherwise slip (anything from stern to vindictive… or actually lenient and forgiving, putting you to shame)
So what if I don't? 

Off the top of my head, things don't change, which can be either good or bad but is more or less the whole point. Old facts, new approach.

Make the choice — given their payment delays, would you drop them or keep them, supposing you can't change the way they act (and possibly they can't either)?

If you choose to part ways, there's no reason to make the split any more hostile or awkward than it has to be.

If you'd rather keep them, it's counterproductive to keep complaining and putting a strain on the relationship. In fact, they could even just start to avoid hiring you and think they're doing you a favour.

So take a new approach. Stop feeling offended, cheated, ignored or whatever is the case. Shrug it off, let it go, stop allowing negative emotions to hold you hostage.

Instead, make it your own policy to extend an unspoken grace period that isn't the client's right but makes your client's life easier, and yours too.

Integrate those delays in your business model. Client payment punctuality is unreliable? Stop relying on clients to pay punctually — as long as they pay at all and don't take too long.

Just keep some floating cash. Don't spend or invest everything. Invest in liquidity and thus security. Your comfort and quality of life will increase dramatically as a result. Ridding yourself of liquidity anxiety will make it so much easier for you to project the calm confidence that wins your clients over as a professional. It will also make you friendlier, and a little relaxed and forgiving attitude (or at least reasonable, at a minimum) will not go unnoticed.

… It enhances your reputation, your goodwill. And that is a great asset and a great benefit to you. It may be intangible, but it has a great effect on your life and can make or unmake your success. Or at least have a very tangible effect on your income.


It's easier to get yourself a 'pillow' — a month's, then quarter's, then semester's, and then perhaps a year's worth of income retained as a reserve — than to challenge your client's habits. Besides, as a service provider it's generally a good idea to challenge your own habits and expectations before your client's. And that's not just a chore — like I said, it can make or unmake a successful practice.

And be positive. Don't be too hard on yourself. Perhaps you're already making more than some people you know who are less flexible than you are. Make that flexibility your strength and your policy.

… Doesn't mean it has to be your stated policy. In fact, as you've probably guessed by now, the whole point is that it shouldn't be! If you extend the deadlines, a lot of your clients will still be one or two weeks (or months, or days) late whether the deadline is two or four weeks (or months, or days). Give them a deadline, but don't expect them to keep it — and don't tell them you aren't expecting them to keep it. Just base your own internal calculations on official deadline + grace period.

If you choose to provide an official grace period, which may well be a good move in some situations, still provide an unofficial one after that and base your calculations on it rather than on the official one.

There, you solved your liquidity problem! You removed the anxiety and lack of security resulting from late payments from your clients, without even talking to them, much less straining your relationships.


Bonus tip: Consider (and I only say consider) a 3% discount for expedited payment, for example 3 days where the deadline is 30. Perhaps also consider a 1% deadline for not exceeding the 30.

The goal of the 3% discount is not to reward your clients for not being late (for not failing to do what they are already obligated to do). And, as you can see, neither is it the effect. The goal is simply to see the money in your account as soon as possible. Once in, it can't be taken out — unlike when it's still in your client's account/reserve/provision for outgoing payments, let alone the client's general account. You have the money, you no longer have to worry, and that's it.

More elaborate theory is that early, as opposed to timely, payment is a legitimate novel benefit for you. Reciprocally, you provide a legitimate benefit, a small financial concession. However named or classified, it's simply a small financial benefit, and getting emotional about the reason or classification makes very little practical sense.

The 1% discount for not exceeding the deadline obviously does reward your client for not breaching, but the reward is smaller, and the benefit is real. And you don't care about all that, remember? What you care about is that the money is already safely in your account, so the risk of non-payment is no longer there.

The 1% discount is reverse-interest. People feel bad about being penalized, or even confronted about doing something wrong, let alone when they see themselves as not being at fault — and agencies will typically not see themselves as being at fault when they haven't been paid by their own clients yet (get used to that, as you can't change it, at least not you alone and not overnight). Applying late interest or some other form of late fees or penalties will be an antagonizing move and will damage the relationship. By contrast, nobody can complain about not receiving a benefit one, through fault or no fault, just simply didn't qualify for. There are no accusations, no implications of wrongdoing, there's just simply a missed benefit.

Don't want to give up 1% or 3% of your current earnings? Up your pre-discount rates, problem solved. Suppose you charge 100. So now it would be 97, and you don't like that, which is fair. So you need to charge 103.09.

Naturally, changing your rates and payment conditions in tandem would be a bit too obvious and defeat the point of applying incentives instead of penalties, so perhaps wait till your next increase and rather than 105 make it 108. Or make it 105 but earlier. Or only with new clients, or new projects for occasional clients. How to give yourself a smooth raise is a whole different topic.

Recap: As a freelancer, one of your biggest competitive advantages is the adaptability of your small, lean, flexible structure (or even sometimes almost total lack thereof). You can adapt more easily than your clients. And you can also adapt more easily than some of your competitors (including freelancers who don't want to adapt). Use that adaptability and profit. If your clients fail to meet their obligations, try to see beyond the breach and see the need that you can respond to — and profit. This can include the need to adapt your business model to a longer payment cycle. Instead of trying to to turn the tide, you can invest your energy and creativity in using it to your advantage — and there are various ways of doing that. At the end of the day your need is liquidity and security, and that can be achieved in more than one way, and some ways are smarter than others. Be guided by pragmatism, creativity and… empathy. Think outside the box. You're allowed to! You don't have a boss to say you can't. Sometimes you can have your way in the big picture by agreeing to not have your way in small things that are ultimately inconsequential.

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