Just pay me.

Late fees are critical. In some businesses the accounting department will manage debt by paying off vendors in the order of who charges the most interest. If you don't have a late fee, you get shuffled to the bottom of the pile and stay there. Accountants are generally hardwired to avoid penalties, so if they see there are penalties they'll pay before the penalty period (provided they have the money).<p>However I have found that if your late fee is high, they will simply pay the invoice and "forget" the late fee. And then you're left squabbling over the late fee, which is quite annoying.<p>Also note that I disagree with OP's interest scheme - in my case its a flat 1-2%. For a freelancer you don't want to tip the scales into lawyer-worthy disputes...

I've found that I get dramatically better clients by requiring 50% payment up-front, and then invoicing weekly. People who balk at the 50% terms are likely to be problem customers, and are best avoided anyway. The weekly invoicing helps new clients understand how much software costs, and prevents sticker shock weeks after the project has begun. Once I have an established relationship with a client that I trust, I'm happy to relax the terms for everyone's benefit.

This won't work in practice. There are laws in place to prevent sky-high compounding interest rates, late fees, etc.<p>I would suggest that you simply take 50%, or some other large portion of the project, up front. Then, as you near a milestone, ask for another piece of it.<p>Billing at the end in one large chunk and then charging enormous rates just means you're not de-risking on the on set, and you're screwing a customer relationship.<p>Also, industry norms are NET 30, and some customers may even operate, and push, on NET 90 terms.

I bill hourly, and now <i>only</i> do prepaid work. Shameless promotion, but invoice issues are the reason I wrote Planscope ( <a href="https://twitter.com/brennandunn/statuses/226414132566585344" rel="nofollow">https://twitter.com/brennandunn/statuses/226414132566585344</a>). The more I can drill into client's heads that time == money, the less likely I am to get into invoice troubles.<p>I haven't had ANY issues since I made it clear that I'm selling my time and not a certain product, and that clients can see their current budget usage at any time. My current 6 month contract pays me in advance for 80 hours, and when he's about 20 hours from needing to fill up the tank again, I invoice him.<p>Over the last few years, I've spent WAY too much time chasing after money. I'm tired of it.

Break payments up into up front and milestones. Ditch any clients who are bad about payments. Worst case you are out the payment for one milestone, but you bought the business intelligence on who is a bad client to work for. I had to leave an Android startup that was at the top of the Market rankings, and getting tons of traffic due to that no matter what they did, due to issues like this and I am much better off for it.<p>Noom/Worksmart Labs would often "forget" to pay me some months, or "accidentally" pay me too little other months. They messed up paying my gym benefit for months once and I took over, then they argued for 10 emails and a a meeting when I asked them to contribute any amount at all. They'd frequently agree to do things like update the address I was paid at which I needed for immigration paperwork, then never do it because they wouldn't pay their accountant either. It was just hell working for them, and switching to other companies has been great. I actually get to focus on work instead of spending all my time seeing how the company is going to try to cheat me next and dealing with it.

In my experience the main thing you should do is make sure that your contract is absolutely clear on the fact that you own all work until it is paid for in full.<p>If you get into paying late / non-paying scenarios, the main thing you want is leverage and in most cases this is the strongest leverage you're likely to be able to gain.

This is known as the "Blockbuster Video" model for treating customers for being late. How did that model work out for them?<p>Dude, these are your CUSTOMERS. Yes, don't be a doormat and YES it sucks waiting 3 months for a check when you expect it in two weeks. But sending 10% a week interest notices for being as little as 1 day late is going to backfire on you. No matter how great you are.<p>And what will potential customers think of blog posts like these...

I'm not a lawyer, but in my contract my attorney specified an interest rate of 1.5% per month for overdue invoices. That at first seemed absurdly low to me - I wasn't dealing with thousands of receivables. This was probably my only client, and that percentage rate was unacceptably painless for a defaulting client.<p>However, he said that there's a legal limit (in the US?) for interest rates you can apply to an invoice. Does anyone know the validity of this?

Speaking from experience, Net 10 is totally unrealistic, unless you're working for one of those contracting, body shops...in which case, you're really just an employee of the body shop. Also, ProTip: the bigger the company, like say fortune 500, if you're truly freelancing/building your own business, hired directly, it's very common to get paid Net 90 (quarterly).<p>Edit: I should add, that if you're doing freelance for a small/start-up-ish/mom-and-pop company, it might be beneficial to get some form of retainer to do some work if you can negotiate that. Or, just stay away from this type of work all together if you can, as this is where I found most billing issues/collections in the past.

There are lots of ways to ensure you are paid on time, being wholly unreasonable is not one of them. The key is to ensure that the invoice doesn't go overdue. Outline the consequences of late payment (work stoppage, no code delivery, no handover) at the beginning of the relationship, and work on terms that both sides are happy with. Tie payments to solid deliverables and send reminders. Bring hardcopy invoices to signoff meetings; if they don't pay it there and then, reschedule the signoff.<p>As an aside, I don't think your abusive penalty would be enforceable (in the UK anyway).<p>I would never agree to your terms.

Rather than going after late fees, I’ve found find it quite effective to offer ongoing clients a modest discount if they pay invoices quickly. For example, if our normal terms on a contract were 30 days, we might offer a client a couple of percent off if they paid within a week of the invoice date. This way, clients are at liberty to wait the full period if they want to, but it will cost them a little more for the privilege.<p>That seems to be enough incentive for a lot of places to pay early, particularly smaller businesses who aren’t on some fixed schedule run by a central accounts department. That in turn reduces the risk to my company, because typically we’ve only worked a little over a month before the corresponding payment reaches the bank, rather than having two full months of revenue at risk if anything unfortunate happens to the client.<p>Obviously this is all agreed up-front and terms are always negotiable, and for some larger companies this sort of scheme doesn’t help because you’re often looking at a longer payment window anyway. In that case, the basic rule is that the longer the window they want, the more the basic rate goes up and the bigger the up-front deposit before we start work.

I have definitely had my share of clients that have been slow to pay, and am very thankful for having had the majority of my clients pay well and on time. However, I have had the occasional client that just doesn't want to pay, and I definitely know the feelings of helplessness and anger that drive the creation of this sort of policy.<p>My question about this method is more about practicality than anything else. Has the OP actually tried to enforce this? It's hard for me to imagine presenting an invoice for 150% of the original and not have the client fly off the handle and make things much worse.

Mike Monteiro already did it better: <a href="http://vimeo.com/22053820" rel="nofollow">http://vimeo.com/22053820</a><p>edit: He also covers a lot more ground in terms of negotiating, having a contract, etc. Well worth the 38:40 to watch.<p>edit2: There's also a book - Design is a Job - which goes into even more detail. I have it, it's pretty good.

Now that I think about it, I've noticed one peculiar thing. The more popular my blog is and the more general exposure I get in the tech community around here, the less problems I have with clients not wanting to pay or delaying payment.<p>Interesting how that works.<p>That said, I have never been able to collect payment upfront because I don't have a personal business and do things as an individual (there's some bureaucratic crap that prevents upfront payments for normal authorship contracts in Slovenia). And I have never not gotten paid completely, it can just sometimes take a few months longer than I would like.<p>That that said, circling back to my main marketing vehicle - the blog - building that has helped me be very picky about the clients I work with, which lets me avoid a lot of the problems.

Based on the most lazy of research sessions, I'd probably just sell the debt to a debt collector, and accept the minor cost which appears to be around 10%, rather than go though all the time wasting grief of doing it myself. One, programming time is worth a lot more than debt chasing time. Two, the emotional side some people feel when chasing debt can impact on the programming (whatever), and personal time. I don't work or function that well when I am all annoyed about something. Better to have the 90% and move swiftly on. Let some one else who job it is deal with it.<p>I suppose, it a personal decision, depending on what we are prepared to do and accept. Some people may be quite happy to chill out and wait, some need the money asap.

What happens if the author of the post is late delivering his work?<p>I'd like to see his full contract.<p>If anybody knows of "really good" rather than just "reasonable" contracts for programming contract work (perhaps involving retention of copyright/similar if client doesn't pay in a timely fashion), I'd love to see them. Please link.

I recently had a non-paying web hosting customer. 3 Months without payment for multiple sites. Finally after numerous warnings I replaced her sites with a 'this account has been suspended' notice.<p>Received payment that day.<p>Kill switches work wonders.

That seems overly adversarial. 10% per week is punitive; not representing any real cost.<p>What you should do is charge enough up-front (as a fraction of the invoice or a flat number) and bill frequently enough that a client stringing you along for a bill doesn't really hurt you.<p>You should also have a few clients going at once so that a few weeks late doesn't mean a few weeks of lost work, because at the first sign of a late payment you switch to other clients.<p>And for your regular clients, especially ones that have trouble paying quickly (perhaps due to corporate policies), ask for a retainer so you can keep their projects at a high priority without sticking your neck out.<p>Professionalism and respect go in both directions. Even large companies don't necessarily have a team of people dedicated to paying your bills instantaneously. If it's a good relationship and they value the project and you make it known that prompt payment is necessary to meet the schedule, they will pay promptly. If not, then no amount of punitive late fees will change that.

A couple of things:<p>With your system the longer the client doesn't pay the invoice the less likely he is to pay at all. Why is this a good system?<p>Are you going to write a blog post regarding your opinion on kill switches? I would be interested to read that :)<p>Why is your CSS in the head of each page rather than a separate file?<p>You rolled your own blogging platform because you think wordpress, drupal or joomla are over the top. Your website is using drupal, wouldnt it be less effort to just use a drupal blogging module rather than have a separate system?

I disagree with this post. The author is setting himself up for a bad reputation. Those unhappy customers that pay exorbitant fees will make it their business to tell others to avoid using the author.<p>Late-paying customers are just part of business.

<i>&#62; Some people think that building a "kill-switch" into their code is a way to ensure prompt payment (I don't; I think it's a horrible idea, but subject matter for another blog, at another time).</i><p>Such practices are flat-out illegal in some jurisdictions.

I'm sympathetic to the idea that requiring prompt payment for work done is a reasonable thing. But ten days doesn't work in (most of) the real world.<p>For many people in a position of hiring contractors to do work, there are times when an invoice can sit in an inbox -- physical or otherwise -- for more time than that before even being opened, much less acted upon via a process that often involves multiple other people.<p>Most companies I've experienced would respond to a demand for a 50% late fee by paying the exactly the original amount, exactly 30 days after invoice, and simply never work with you again.

This can't be legal in many places. Also, you'll come across as not very professional when trying to charge 150% interest on a month late invoice. Will seem like a scam to many. Surprised this made it to the front page. Imagine it was BofA forcing these terms on a mortgage for a family.

I definitely ran into clients like this more than few times when I did freelance development.<p>I even once had a small restaurant owner ask for $750 back (after work had been performed) because his refrigerator broke and he needed money for repairs.<p>The types of clients who won't pay are generally not worth working with, and it takes time/experience to spot them before signing to work with them.<p>"Just pay me" is one of the reasons we're starting matchist (matchist.com): no more problem clients for quality developers.

Just out of curiosity, why does the author think that "kill switches" are a bad idea? Comcast will cut my internet connection if I don't pay the bill, so will other utilities...

Although this might fly with some SMBs, this is not how multinational companies work.<p>In a typical multinational company there is an annual DPO (Days Payables Outstanding) goal, that shall be achieved no matter what. So unless a vendor has monopoly or has unique product/service, such approach will not fly [unless all such vendors have the same terms].<p>So if all software developers are using 30 days or 60 days terms, 10 days will not fly.<p>Until then, I would recommend a more constructive approach - use factoring. Don't know the cost in US, but certainly less than 10%. Increase your price by the factoring charge. Note that this might require you to update your contract and include right to re-assignment [check with legal person].

When our clients didn't pay us, we stopped all work on that project until we had their money in our bank account. That's really the best incentive: send out invoices once a month, and stop work on whoever doesn't pay you. People don't want to see all that money they paid go down the toilet. Getting 10-20% up front eradicates situations where people who don't want to send you the last payment for a finished project.<p>There's also nothing wrong with actually paying them a visit and politely demanding your money (only if they're in town of course). This can make you seem a bit more like you actually exist and you're not some piece of paper asking for money.

Great article. I think the one hook in here for me was: <i>This is about being a professional, and being treated as a professional.</i><p>One of the big things that has helped me is to include a clause in my contract that says "I'll deliver code when final payment is received." This mitigates a lot of trouble and usually helps to secure payment a lot quicker. The only caveat on this is that for client's whom I've developed a relationship with, I tend to ship code before final payment with a net fifteen window on the invoice.

10 day payment terms is not compatible with my experience of freelancing for small &#38; medium sized businesses. With corporate or government clients that amount is just not even realistic at all. 30 days is fairly standard. 45 or even 90 days is not unrealistic for larger contracts.<p>I also think that 10% per week late fee - though I certainly understand and sympathize with a freelancers grief - it gives me a somewhat unprofessional impression of a freelancer who is either not financially stable or just vindictive. When I hire somebody I like to feel that they will be around next month. A more friendly approach with long-term benefit is to just stop working with clients who don't pay on time.<p>To make your life more stable as a freelancer I can say from experience that you want to obtain repeat clients as soon as possible - clients who want you to work on either retainer, or at least agree to some minimum amount of hours per month. Over time get rid of clients that don't pay on time or are problematic in other ways. Once you get past that point freelancing can be a really enjoyable and profitable to earn a living. Until you get there, though, you can tend to spend a decent amount of time haggling and arguing about money with your clients.

Well. This has generated quite a conversation (both here, and on the blog post). I suppose I better clear the air, a clean up a few misconceptions. The following is pretty much a cross-post from the comments there:<p>1. The default terms are exactly that. Default terms. They will be discussed with clients before a project starts, and we will negotiate terms that suit us both. Think of it like asking for all the brown M&#38;Ms being removed from a rockstar's rider. If a client is unwilling to discuss terms with me or unwilling to negotiate for their project, then either the project will proceed with these terms, or I may refuse the project entirely.<p>2. The actual wording allows me to implement the penalty at my discretion. I've had a couple of late payers, and often just the mention of the penalty will prompt them to pay. I'm not trying to destroy client relationships here - I just want to get paid.<p>3. A penalty for late payment isn't the only protection; that would just be stupid. Aside from contracts, I am very willing to refuse working for clients who I don't trust to pay on time.<p>4. This isn't something that I will just spring on a client at the invoicing stage. Yes, it's copy on my invoices, but that's there to remind clients of the agreement.<p>5. Negotiation is important. I realise that this is a re-hash of point 1, but it bares saying twice. I have contracts with different clients where different terms are enforced. The point is that these are default terms, which are there to protect me and my business. They are my starting point for negotiation. So long as you don't come at me offering "I promise to pay you on time" as a point to negotiate with (you can't negotiate with promises that you should be keeping anyway), then we'll figure out better terms for both of us.

In my humble opinion, I think most these comments miss the root problem which is getting paid for the work. I know I am not supposed to plug own companies, but since we have been dealing with this very issue at the platform and process level, I will chime in with what we know. We decided that the way to go was pre-payment - ie work only begins when funds are in hand. The next questions is how to break down the chunk of work to make it easy for a project owner to pay and yet meaningful enough to the developer. We settled on a week's worth of time. Ie a developer in GroupTalent can submit a "sprint" of a week's duration working as many hours a developer would like to work in that week (most settle around 20-30hrs).<p>I am personally exploring a new twist in this process with the ability to force customer requirements into user stories and let developers charge for implementing a number of these stories in the same prepayment model.<p>hope this helps

If you are in a position to dictate this NET 10 or late fees conditions, then by all means, go for it. Work has to be paid. This can work well in markets where it works in your advantage. The only problems is that in many markets on can't enforce such rules, because there are many providers to the same service driving price and terms down.

I assume you're doing "work for hire", which implies that your copyright is assigned to the client in consideration for your wages. In your agreement, you could explicitly specifiy, absent payment in full, the copyright remains with you. (This is may be the case anyway.) That is, they don't own it without paying for it.

I would never work with anyone who even proposes such terms. Not because I don't want to pay on time (we always do) but because those terms are unprofessional, to put it mildly. If you want to be treated like a pro, act like one.<p>Update: Having looked at your resumé, I probably wouldn't work with you anyway.

When I was freelance I was lucky enough to get paid on time. Every time. I attribute it to the communication I had with the client. I would speak or email the client everyday I was working on their project. When it came time to invoice them I would simply send out an email.<p>Communicate often. It helps.

I freelance and bill my clients and get paid Net 30. The issue of late or non payment is not that easy to resolve just by slapping late fees etc. It really depends on many factors including your clients ability to pay on time (sometimes they depend on payment from someone else to pay them before they pay you), how big they are etc etc. My current client was late by about a week on my last payment and his reason was "my bank screwed up". I think either you go through a detailed contract listing every possible screw-up that could happen but most likely, late payments will happen here and there.

The basic problem is a power imbalance, and its result is that <i>they</i> tell <i>you</i> how they pay. So any proposed solution built on the idea of <i>you</i> telling <i>them</i> how to pay seems very much in danger of failing for exactly the same reason that there is a problem in the first place.<p>(Perhaps the main avenue to a solution is in freelancers acting collectively somehow -- thereby becoming more powerful. If clients risk being unable to find service-providers because those clients have been blacklisted, they would more strongly feel the value in paying-up.)

I whole-heartedly agree with the terms, if not quite the tone. I've had to chase companies that had the cash to waste visibly for late payment. I've had to chase companies that wanted to change terms after there was acquisition interest. In both cases, I had to waste time chasing them down and I feel that the usual "net 30" scheme was to blame. The companies see the 30 days as a way to procrastinate after the purchase and the opportunity for a situation change to make things weird creeps in.

&#62;10% per week, every week, starting from the first day that the invoice is overdue.<p>I'm pretty sure that's much much more than the maximum rate permitted by law.

Dude, stop with the late fees and go check out www.zencash.com. It was built exactly for this purpose. Get a better receivables plan. ZC connects to your invoicing app and will send reminders on your behalf, or if you're really done with that customer, send the bill to collections.<p>It's not worth the stress, trust me, I've been there. Full disclosure: I just joined the team as DoP.

LOL love the doormat remark. It's so true. I think your payment system markup makes a lot of sense. People often do not fully appreciate that a lot of us do freelance for needed extra money, so their withholding of payment is actually pretty problematic for many of us. As long as your markup policy is written into the contract, I think your process is brilliant.

Check the Mike Monteiro linked in another comment. Professionals use lawyers, not amateur contract terms, to get paid.

Gotta ask - how often does it come to this for you and do you actually manage to collect these penalties?

The way that most businesses and professionals outside the tech industry actually deal with this is quite simple, and quite uniform. Two percent (or thereabout) discount for immediate cash payment.<p>For example, 2/10 net 30 means 2% discount if paid within 10 days, otherwise full amount due in 30.

That could work - I'd be tempted to put a limit on it though - a 10% penalty (or whatever) immediately upon overdue, and a cutoff point where you simply send them to a collection agency.<p>Of course, in the end, you put what the law allows and your clients will accept....

When I contracted, my rule was to never lend the client more than 10 days pay. My clients didn't seem to have a problem with that - even a big multinational.<p>If your clients can't get their act together in 10 days offered to work on retainer.

Similar (but more entertaining): Fuck You, Pay Me <a href="http://vimeo.com/22053820" rel="nofollow">http://vimeo.com/22053820</a>

10% a week interest is forbidden, by law, in my country.

you should probably stop free-lancing.