H

ave you ever found out that your client decided to change their payment policy to Net 30, instantly putting you in a financial pinch? You sent your invoice and were expecting cash flow within 7-10 business business days, only to realize there’s no money coming in for at least a month.

Big agencies or brands with big marketing budgets can afford to pay you sooner than a 30 day turnaround. So, why is it so common to pay their freelancers on a Net 30 schedule?

For brands/agencies that have the cash, the main reason they have a Net 30 policy is because they like to pad their Profits & Losses in any particular quarter. It’s an HR/accounting practice that relies on you, the “vendor,” to keep track of the debt owed by your client — essentially acting as a creditor to the agency until they decide to pay you on their terms. And since they’re big, they feel you can trust their credit and therefore should have absolutely NO reason to demand anything less.

Yes, I’m salty about this. Even if the agency doesn’t realize it, it’s unfair to the freelancer. And it needs to change.

In these cases, you (the freelancer) are MUCH smaller than your client. No matter if you receive money by paypal, check, or a tool like Coworkly,  you literally cannot afford to have a bunch of money tied up in unpaid invoices, especially if you’re subcontracting your freelance network, paying for studio space, or have debt of your own.

How to handle Net 30 Requests By your Client

First off, make sure you confirm their payment preferences before even quoting  a price. If you’re unsure, then the smart thing to do is up your base price & then charge a discounted rate if they decide to pay on more favorable terms.

If you’re not doing this already, here’s what you do:

  • Take your current rate & bump it up by 10%. That’s your new base rate
  • If the client wants Net 30, no problem. They pay that new, higher base rate.
  • Let them know that if they’re able/willing to pay within 15 days or less from the date of the invoice (Net 15), they get a 10% discount!

Tradeoffs! You’ll feel better knowing you’re getting something for taking such a big hit to your cash flow. And clients will appreciate the discount offer and the choice! Everyone wins!

When to offer Net 30 at your discount rate

This is a bit tricky, but generally, if you’re working with a client that has less resources or is a small business/startup, you should be more willing to work with them on a payment schedule. Some ideas for you to try with these smaller clients:

  • Break it up into quarters, triggered by different milestones in the project.
  • Set up a 10-50% initial deposit at the start of the project (you can do that with the Coworkly Scope Builder) & then charge the rest upon completion
  • Negotiate between Net 15 and Net 30. Maybe a 20 day turnaround?

Be confident + communicative + appreciative

Generally speaking, the sooner you communicate your terms, the better. If an agency reaches out to put a hold on your calendar, ask about their payment practices & let them know about your base price + discounts. Be really pleasant & put on your sales hat.

Here’s a template for that email!

That way, they won’t be surprised. They’ll also appreciate the upfront breakdown.

Wanna make that conversation even less awk? Next time a client reaches out, use Coworkly to create custom scopes for them to review & book.

Posted 
Jul 18, 2022
 in 
Tips
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