As unemployment rates remain elevated in most developed countries, people with specific marketable skill sets, such as website development, graphic design and copy writing, have been applying those talents in the marketplace in the form of freelance work to supplement their income streams.
As a person that has done a lot of freelancing work in the past, I quickly that there is much more to being a one-man web development shop than actually creating websites. When you work as a freelancer, you are starting a small business and hiring yourself as an employee. This means that you need to get all appropriate licenses (such as a business license and a sales tax license) if your locality requires them and you may even want to incorporate your business down the line. You also need to keep a good track of your income and expenses using Quickbooks, Outright or Excel for tax purposes.
Because you are essentially starting a small business when you opt to become a freelancer, you want to make sure that your business actually makes money. Financial author Dave Ramsey is quoted as saying that a business that doesn’t make any money is a hobby. Almost everyone that does freelance work does so because they want the extra money from the projects that they complete, thus, it makes sense to engage in behavior that will cause your business to maximize the amount of money that you’ll make.
One of the major pitfalls that freelancers run into is that they fail to adequately manage the business aspect of their work. They focus on actually doing the work and ignore many of the business aspects that revolve around the work that they do, often resulting deals which leave the freelancer making much less than they were expecting to or even not getting paid at all.
As a freelancer, one of your top priorities should be getting paid by your clients. If you have ever read the “Clients From Hell” blog, you would quickly realize there are a lot of crazy people that want to hire you—people that will either try to short change you, pay you with some worthless goods or service that you don’t want, or won’t even pay you at all.
In order to make sure that you actually get paid, the first thing that you need to do is prequalify your clients. If a person comes to you and asks you to do work for them, but you don’t feel like they have their act together and don’t believe they can or will actually pay you, it’s okay to tell them that you can’t take their project. If it’s the first time that you’ve worked with the client, it’s not out of line to ask for business references.
You should also have a document signed by both you and your client that clearly outlines what work you will do, what work you will not do, when you will have the work done and how much you will be paid and when you will be paid. You should also have a clause in your work agreement about change requests and additions and how that will affect the price. I typically refer to this as a “scope statement” in the agreements that I make.
Here’s the text that I have use in my scope statements:
The website developed will be as described in the initial description and the “section specifics” section of this proposal. Additional minor features will likely be completed at no-charge. If any of the “upgrade” options are chosen, they will be completed at the price listed above. Additional major features/usability changes which are requested during system development will be billed at a cost of $XX per hour. Matthew Paulson has sole discretion as to what would constitute a ‘major’ and a ‘minor’ change. An estimate will be provided for any additional worked that is deemed ‘billable’ before it is performed.
If it’s the first time that you’re working with a particular client and don’t know them terribly well, you should definitely ask for a percentage of the payment up-front. Depending on the size of the project and how you feel about the customer, either 25% or 50% is an appropriate up-front price. If the client appears to be really sketchy, insist on full payment up-front or simply say no to the project.
You also need to make sure that you do a good job of invoicing. Once you have completed your project, send an invoice to your customer with the remaining balance. You can do this with a simple word document of which there are hundreds of templates online for, or using a more advanced online invoicing system.
When I email an invoice, I typically say something like, “Let me know when you send the check so that I know to look for it in the mail.” Using a phrase like this will help you know when your money should be arriving and give you a reference point in the event that the client is slow to pay. In most cases, you’ll be paid quickly, in cases that you don’t, call or email the client on a weekly basis asking them when you will receive payment. Consumer advocate Clark Howard suggests that freelancers visit the client in person if the client is slow to pay. He believes that in-person visits are more effective for collections.
In the event that you don’t get paid, you probably didn’t do the best job of pre-screening your client. You have the option of taking the client to a small claims court and will likely win a judgment against them, but collecting on that judgment only gives you a “license to hunt” and doesn’t necessarily mean that you will get your money right away or ever. Though not being paid is a worst-case scenario, you can write off at least a portion of the “loss” on your tax return as a deduction. (Note, when filing your taxes, I always recommend doing an efile, since they are processed much faster). Tax issues can be a bit messy when freelancing, so, talk to an accountant if you have questions.
The three keys to making sure that you get paid for the work that you do as a freelancer are to pre-screen your clients, clearly communicate terms and stay on top of billing. If you are up-front about how much you are charging, when you should receive the money and what work you will do and will not do, make sure that you only work for good clients and stay on top invoicing and billing your clients, you will avoid the majority of the issues that would result in you not getting the money that you have rightfully earned.