Project management for freelancers

The Ultimate Guide To Getting Paid As A Freelancer (2018 Edition)

By Brennan Dunn

Most articles on the web that talk about small business cash flow or money management or whatever else tend to focus on one thing: “spend less.” Often the advice is around the importance of saving money (duh!) or reducing the number of lattes you drink daily (silly).

This is not that sort of article.

Today I want to focus on how you can get paid faster, get paid more reliably, and never need to worry about whether or not that invoice you sent out will arrive before the rent is due.

Most freelancers, myself included, tend to be optimists. We expect that things will work in our favor. Don’t we all love that high you get after signing a new client? When you realize that over the next few weeks or months a bunch of brand new money will be sent your way?

But that sense of accomplishment and optimism can fade pretty quickly. And it usually fades around money. Late invoices. Stubborn clients. Squabbling over payment terms. The stress that naturally comes around when you realize that you live in a world of fixed expenses and variable income.

When I started to build my agency, I became responsible for the financial livelihoods of quite a few other people. As a freelancer, I supported myself, my wife Deborah, and my kids. But as the owner of an agency, I suddenly added Andrew (and his wife), Ryan (and his wife, who was going through medical school), Ann, Kristi, Thomas, Zack, and a number of others to the list of people who depended on me to keep their bank accounts from overdrafting.

You already know how hard it is to keep yourself afloat. It gets exponentially harder when you have a twice-a-month payroll expense.

We couldn’t afford to let our money situation run wild. I had to build into the way we worked certain frameworks that helped us ensure that we’d get paid on time so that I could pay both my personal and business expenses.

Here are a few of the things I learned along the way:

Always get a deposit

Before starting work on any project, get a deposit payment — especially when working with a new client. As we’ll discuss shortly, it’s really important to set the precedent that if you’re not paid, you don’t work.

I see many freelancers, especially those new to the profession, who don’t do this. Either it never occurred to them, or — more likely — they don’t want to “rock the boat” and make demands that could jeopardize the new relationship they have with their client.

But just about every professional services company requires some sort of downpayment as a way to ensure that someone’s serious and able to pay.

If you’re billing for time, I like invoicing for one to two weeks of work upfront. You treat this income as a credit, and when you produce invoices in the future you deduct the total due from this credit pool.

Most invoicing tools support the idea of client credits, but if you’re using one that doesn’t, here’s what you can do: When drafting a new invoice, include a line item with a negative total amount that either fully deducts the invoice total (if the total is less than the client’s credit) or deducts whatever’s left from their initial deposit payment.

I typically require deposits when a contract is signed. This could be months prior the kickoff date of the project, and as a matter of policy I let my clients know that I can only schedule their project if they’ve paid a deposit. Be careful though: This money is a liability, and you probably shouldn’t treat these deposits as actual income.

Invoice frequently

When I was first starting out, I invoiced twice a month. You should invoice as frequently as you can — preferably once a week.

The shorter the loop between sending out an invoice and getting paid, the better. If you’re working on NET 30 terms (meaning: the client has 30 days to pay your invoice) and you invoice once a month, you’re looking at upwards of 60 days (2 months!) before getting paid for your time.

This is less than ideal, especially since many of us don’t have the cash flow to support that.

In the United States, many clients still pay using paper checks. And if your clients are at the opposite end of the country, as many of mine were, it might take a while for checks to slowly make their way from your client to your mailbox. I’ve been through days where I’d stare at the clock, praying that the mailman showed up with a client check before the day’s deposit window closed at the bank.

One of the best ways I’ve found to get paid faster by check is what I call the FedEx Trick. Send your clients a sign-on-delivery packet that includes a printout of their invoice and a pre-paid overnight FedEx pouch. Have them put their check in the pouch you sent and place it in the mail. This might cost you a few dollars each time you invoice, but it can really help eliminate the stress associated with the ambiguity of “the check is in the mail”.

A note about credit cards: The common pushback freelancers have toward accepting credit cards are the fees, which are typically around 3%. Any normal business would kill for that little transaction overhead! My biggest gripe with credit cards are consumer protections. Lets say you build a website for a new company, and a few months later that company is out of business. If they paid you with a credit card, they can issue a chargeback. While a solid contract and documentation can often help you win these, you shouldn’t want to ever put yourself in this position to begin with. Checks and wire transfers are arbitrated in civil courtrooms; credit card disputes are arbitrated by American Express and such.

Don’t work unless you’re paid

Always try to get paid upfront. Not just for deposits, but for everything.

I once had a client who had booked about half of my team. This was a good client, who paid their bills on-time (we had NET 30 payment terms at the time). Mid-way through the engagement they defaulted on one of their invoices. And because we invoiced twice a month, we actually had two outstanding invoices out and we were working toward an upcoming invoice when I realized they were overdue.

So I called the client, who I was on fairly good terms with, and let him know his payment was late.

“Brennan, I meant to tell you… I’m out of money. But it’s ok. I’m talking with some investors this week.”

We had around $80k outstanding. And I then realized that there was a fairly good chance now that I’d never see that money, or at least not anytime soon.

“Paul…”, I hesitantly replied, “You know our costs. You know what we’re charging you each week. Why am I just hearing about this now?”

“I needed the app closer to being finished before I could raise the money I needed to —“

Paul, I don’t care. That’s not my concern.”

“Brennan, I’m putting everything on the line with this business. My house. My kid’s college money. Everything.”

Paul, as the founder you have everything to gain and everything to lose. I’m not your investor. I own a services firm, and I need to pay people for the month and a half they spent working on your project. And now you’re telling me you don’t have the money.”

The conversation didn’t get any better. And this made me realize something: I never, ever, ever want to need to play the role of debt collector ever again.

After this project, I began telling my clients that we only work if there’s money in the bank. We’d invoice weekly, and if the money for the upcoming week wasn’t cleared in my bank account by Monday, I’d rather us sit idle than work on credit.

When questioned, here’s what I’d say:

“The best use of my time is making sure that my clients get the best service possible from me. If I’m spending time chasing around invoices, I’m not spending that time on delivering value to my clients.”

And it worked. This might be a bit different than what your clients are typically used to, but you need to let them know what the advantage is for them (you being able to focus on them instead of delinquent clients).


I’m not going to talk here about creating retainers. I covered that in-depth in the last section of Double Your Freelancing Rate and previously on this blog.

Retainers and productized consulting services are subscriptions. They’re predictable expenses for your clients and predictable revenue for you.

My accountant, who I pay on retainer, holds a copy of my credit card and charges me on the 1st of each month like clockwork. I never see or pay an invoice. Likewise, my coaching clients are automatically billed monthly.

If you have clients who are paying you monthly, try to avoid needing to send invoices in order to get paid. Setup some sort of automated payment system that will draft from your clients account each month.

Here are a few thoughts on how you can do this:

  • I use GetDPD, which gives me a unique URL for each subscription service I offer (which at the moment is just my monthly coaching). The payments actually happen through PayPal.
  • You can setup recurring billing directly through PayPal, but I believe it’s not as turnkey as using GetDPD as a frontend.
  • allows you to setup recurring ACH payments with your clients.
  • If you’re OK with the liability, you could signup for a free Stripe account and manually enter in your client’s credit card info and associate it with a monthly billing plan (preferably over the phone, you don’t want to have this info floating around your computer).

Get it in writing

Always use a contract!

I’m still shocked and surprised by how many people I talk to don’t have legal, binding contracts between them and their clients.

Besides the usual indemnity, non-disclosure, and other clauses that go into services contracts, you want to make sure your contract includes provisions for what happens if you don’t get paid on time.

At a minimum:

  • The client owns nothing they haven’t paid for.
  • You charge interest on overdue invoices (non-issue if you charge upfront).
  • You have every right afforded to you by the courts to get that money back.

If you’re working with a client who isn’t exactly fiscally stable (like the example I gave above), I’d strongly advise you to have your clients personally guarantee your agreement with them. When I contacted my attorney in a panic to let them know that I was owed $80k, he told me that the best he could do was to send them a strong letter and contact their bank with a request for the money. But if the bank account didn’t have anything in it… I was out of luck. Because my client was behind the shield of a corporation (which, in the US, only takes $100 sent to your state’s Corporation Commission) I couldn’t really do anything more.

(In the next few weeks, I’ll be updating the Complete package of Double Your Freelancing Rate with the Master Services Agreement I use for ensuring I get paid, along with indemnity, non-disclosure, etc. I paid a good amount of money — over $11,000 — for this contract, and you can save yourself a lot in legal bills by using mine. If you have the Complete package, you’ll get this update for free.)

(Also, obvious disclaimer: I’m not a lawyer. This is all what my lawyer told me. What I relayed above might not be applicable to you.)

Recruit a “bad cop”

If you’re not charging upfront and a client is late on paying, the best thing you can do is be stern. Let them know that you need to stop work, and that it will only resume once you’re paid. (This is also a great time to mandate a pay-upfront policy.)

I had a full-time assistant who was my “bad cop” — she’d call clients who were overdue and relay on the terms of our contract, namely that we don’t work if they’re in a state of default. Since many of my clients were attached to me and were on really good terms with me, I could position myself as the “good cop” who helplessly needs to go along with whatever Ann, the office manager, says we need to do.

Earlier this week, I had a great interview with Kurt Elster (Episode 20 of The Business of Freelancing Podcast). In our chat, Kurt mentioned that he has his girlfriend play the role of his “credit analyst”, and she would be the bearer of bad news to overdue clients.

The preferred path is to avoid this altogether by always getting paid upfront. But if you’re not there yet, try to think about who could be the “bad cop” in your freelancing business.

What to do when you need cash NOW

If you need money immediately, or you want to raise some money based on your past track record as a consultant, there are a few options for you.

Are you familiar with invoice factoring?

My first entrepreneurial pursuit was a lead generation company I started after dropping out of college. Most of my early customers were mortgage brokers and real estate agents, but I started to see that factoring companies were signing up. “Factoring? What the heck is that?” I remember thinking. And after some Googling and discussions, I learned that they were the business equivalent of payday loans.

Here’s factoring in a nutshell:

Many companies, especially those that require buying from suppliers and then selling to distributors, tend to have a lot of receivables (invoices) floating around at any given time. And often the payment terms are NET 60, NET 90, or more, especially if they’re working with BigCos or governments.

Often times, these companies want to do things that companies are wont to do — like expanding, purchasing new equipment, and so on. You might expect that these companies get a bank loan. But getting a loan, whether for personal or business reasons, requires time (which not everyone has), due diligence by the lender, and quite a bit of paperwork.

A factoring company is a special type of lender that will buy your outstanding invoices at a discount. There are other companies that can lend you advances based on your historical cash flow.

The terms, for both factoring and advances, tend to be pretty bad, especially when compared to traditional loans or lines of credit. But you can often get money immediately, which is helpful when you have bills that need to be paid.

Here are a few ways to get working capital:

  • Kabbage. This is really only helpful if you get paid through Stripe, PayPal, or other processors that they support. They’ll look at your past revenue, and lend you money based on that. They set you up on a fixed payment schedule, and Kabbage’s fees are pretty high.
  • PayPal Working Capital. If you do a lot of transactions through PayPal, this is actually a pretty nice option. Like Kabbage, they’ll look at your average monthly revenue and come up with an amount based off that. But unlike Kabbage, there’s no fixed payment plan. They’ll take a percentage — between 10% and 30% — of each future sale until your loan is paid off. And the origination fee is pretty low, often around 5% of the total they lend.
  • Fundbox. This is a new service I just came across, and it seems that they’re targeting freelancers and agencies. They’ll buy your outstanding invoices and pay you right away, but they’ll take a percentage of the invoice amount as their own.

Closing thoughts…

In closing, here’s what I recommend:

  1. Bill weekly. It’s easier for your clients to budget for, and makes charging upfront a lot easier (since the burn rate per week is fixed).
  2. Charge upfront. Get deposits upfront, and invoice ahead of time.
  3. Use a contract that guarantees that you’ll get paid. Use electronic signatures to speed things up.
  4. If you can, live off last month’s profits. If you need cash, don’t be afraid to seek out the cash you need to survive, even if it means losing money. Stressing over whether or not you can pay your bills is something you want to avoid, as it will adversely affect your work and the relationships you have with your clients.
  5. Ensure that what you’re charging will allow you to generate the income you desire. Use our freelance rate calculator to see if you’re on track.

What are some things that you’ve done to make sure that you’re paid on-time and keep your business humming along nicely? Let me know in the comments below!