In the past few weeks, I’ve spoken with a few freelancers who would like to work with direct clients but are afraid that they won’t get paid. One commented that she really enjoys working with agencies because of being able to check Payment Practices or a similar resource in order to determine the client’s creditworthiness. Although there is no Payment Practices for direct clients, I think that you can take some steps to ensure that direct clients will pay you, or to at least minimize the risk of nonpayment. I think that it’s useful to apply some or all of these steps depending on who the client is and how paranoid you are!:
- Get full contact information from the client, including their phone number, mailing address and physical address.
- Note whether the client is a member of any associations such as the Better Business Bureau to which you could report the client if they don’t pay you.
- Google the client; see what kind of information about them is floating around the Internet
- Ask for references from other freelancers or suppliers the client works with; ask those people about the client’s payment practices.
- Clearly state your rates, payment terms and acceptable payment methods. Ask the client to issue a purchase order confirming that information and listing the name, e-mail address and phone number of their accounts payable person.
- If you have doubts about the client or you are doing a large project for a first-time client, ask for partial or full payment in advance. I require 100% advance payment from anyone who is not an established business.
- Accept a variety of payment methods. For example, I accept checks in dollars, euros or pounds, wire transfers, ACH transfers and PayPal. This gives clients a few payment options, and I always stick to the arrangement that they pay their banking fees and I pay mine.
Obviously, not all of these ideas apply to all situations, and some people are just more trusting than others. Personally, I like to believe that clients are fundamentally honest but I always ask for a PO and for the accounts payable person’s contact information, and I always require individual clients to pay in full in advance. Also, out of curiosity: agency owners, how do you vet your clients’ creditworthiness?
Good information.
I don’t have many direct customers, but those all sound like good tips.
For the few clients who have found me, there haven’t been any problems when the following happens: The company has a well-designed web site; the person who is calling me can be reached by calling a phone number listed on the site; the contact uses an email address that is the same as the domain used by the web site; and it can be verified that the company and its web site have been around for a few years (such as, by using archive.org/). Also, it’s reassuring to me when the contact sends a Cc: of all our emails to somebody else in the same organization.
Also, in each case the company is recognized. By the latter, it means that there are news articles about the company, the company makes a product or performs a service that I know something about, or it’s listed on the stock exchange. It’s also worthwhile to find the contact’s name on Google.
Of course, none of those things are guaranteed. Does anybody remember Enron? It had all of those things going for it, when it declared bankruptcy in December 2001. Among other debts, they owed many thousands of dollars to restaurants, flower shops, gift shops, and a couple of translation agencies in Houston.