Freelancers, small businesses struggle to get paid

After spending too much time chasing payments, many firm up contracts

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NEW YORK — For many freelancers and owners of small businesses, signing up clients and completing projects is just one part of the work. Trying to get paid can be almost as time-consuming.

Sandy Sloane needed 11 months of persistence before one client paid in full for her publicity and event-planning work. The client was having cash flow problems, but said he was paying other vendors. He put off paying Sloane although their $4,000 contract stipulated he would pay within 30 days.

“I had to threaten legal action before he started making payments, since repeated invoices and late fees did nothing,” Sloane says.

Getting paid can be an issue for a business of any size. But delays can cause particular difficulties for freelancers such as writers and graphic designers or small business owners such as building contractors and technology consultants who don’t have a steady cash flow. Slow payers can make it hard for freelancers to keep up with their own bills. And it’s not just the money — it’s the frustration of multiple invoices, emails and phone calls.

“I spent way too much time writing to him and sending repeated invoices, at least one per month,” says Sloane, who’s based in Rochester, N.Y. She has since changed her policy: She gets half the invoiced amount up front, 25 percent on an agreed-upon date and the rest within 30 days of the project being done.

Since the Great Recession began, many companies looking to cut costs and gain flexibility have used freelancers rather than regular employees for short- or long-term work.

Most freelancers need to invoice customers and wait. Small business customers may be short of cash themselves or may make other bills the priority. Big corporations stipulate the payment policy when they hire freelancers or contract with a small business owner, and may take several months to pay.

Freelancers often don’t think about the intricacies of getting paid when they’re starting out. It’s often not until something goes wrong that they realize they need a formal policy.

Photographer and videographer Tom Hoebbel began including payment terms in his contracts after being burned several times. He requires payment within 30 days and warns clients they face a 1.5 percent fee if they’re late. Hoebbel, who lives in Brooktondale, N.Y., has to be tough — he told one of his favorite clients, a local arts organization, that he won’t work with it anymore.

“They told me, ‘we don’t have the money,’ ” Hoebbel says. “It’s understandable for a nonprofit arts company, but I need the checks to come in so I can stay in business, too.”

Slow or nonpayers can wreak havoc with Hoebbel’s finances: “I rely on payments from clients to pay my vendors and hopefully a bit of a salary for myself. … In lean months, this can be a real problem,” he says.

When Jaimyn Chang began requiring clients to give him a credit card number last year, it changed his business dramatically. Chang works in search engine optimization, which helps individuals and businesses get a high ranking in internet searches and thus be found quickly. But Chang, whose Boomin Agency is located in Raleigh, N.C., found that customers that didn’t understand the need for SEO weren’t likely to pay.

“Those who are tight on cash and have limited knowledge about the services they’re asking me to provide are usually the ones who find ways to not pay,” Chang says.

Clients now must provide a credit card number before Chang does any work. “It weeded out a lot of clients that were trying to scam me from the get-go,” he says.

Some new freelancers are so eager for work they’re willing to defer payment until the project is completed. That can be an invitation to not getting paid. Another common problem is not being prepared for the what-ifs, says James Hammerschmidt, an attorney with Paley Rothman in Bethesda, Md. For example, if a customer requests many changes to a project, a freelancer might have to do more work than expected for a set price. Hammerschmidt says to create a contract that’s very specific.