5 Ways Creatives can Deal with Non-Paying Clients

Freelance designers have serious problems when it comes to collecting payment from clients. As a follow up to another post that deals with some steps being taken to give creatives some defense against clients who refuse to pay, I wanted to know more about the experiences other creatives have had in dealing with such clients or what design professionals have done to successfully collect on what they’re owed.

The range and variety of solutions offered up by members of the LinkedIn group, Creative Dilemmas, came as a pleasant surprise, shedding some brilliant and practical solutions to creative professionals’ invoicing woes as well as steps other creatives can take to avoid getting burnt.

Below is a list of five ways creatives can prevent getting burnt by non-paying clients.

I.  Collect a deposit before any work begins.

“We collect a deposit up front and then invoice the balance at the end. This way we are covered for at least half of the total cost.”

Having to deal with a non-paying client can be easier to manage — or completely avoided — if some preventive strategies are put in place from the very start. Making payment on a project deposit a necessity of every project you take on protects you in two key ways. First, it ensures you get paid for at least a portion of your total projected time and/or expenses. I’ve found my own clients to be comfortable with 25% of the total projected cost of the project, though it’s common for creatives to ask for at least half of the total cost.


“If [clients] don’t want to pay a deposit, then they have no intentions of paying [later
].”

Many creatives have also found collecting a project deposit to be a useful tool for separating good clients from the bad. If you choose not to collect a deposit, you may never get paid — no one likes to work for free.

II.  If You Don’t Trust Them, Don’t Work with Them

“The two times in my 22-year career that I felt uncomfortable about a client were the two times I got stiffed.”

In our day to day lives, we choose to associate with people we can trust. This mindset should also apply to the way we conduct business. A client that’s in a rush to get work done or makes promises that sound too good to be true are signals that you should reevaluate the relationship. Trust your instincts. Ending a relationship with a client that displays warning signs like these could save you a lot of time and energy later down the road.

“I only deal with companies who I feel are trustworthy from the very start. Life’s too short to be chasing invoices.”

III.  Be Professional, Be Assertive

“Perception is everything. To many, ‘freelancer’ means ‘pushover’. If they think you’re a pushover, that’s the treatment you’ll receive.”

Freelancers have to make themselves crystal clear in the way they conduct business. Otherwise, we run the risk of being walked all over, or misunderstood. Let your clients and prospects know that you’re running your business on your terms – not theirs. It might come as a shock, but people don’t want to work with a quirky, egotistical designer that’s difficult to work with: they’re looking for a reliable, honest professional that is as concerned about their business as they are about theirs.

IV.  Get Creative When It’s Time to Collect

“I have a photo of my dog looking extremely sad by an empty dog bowl with a headline that reads “Time to Feed the Dog”… it has invariably caused my invoices to be found and processed.”

While this may be proof that even funny, good-humored approaches to collecting payment can work, it also proves that there’s no single approach to invoicing that guarantees you’ll be paid on time. Every invoice I send out consists of one copy delivered to the client in the mail, one via email and a phone call to letting the client know that they’ve been invoiced. This may be annoying to the client, but it shows them that I’m serious about what I do and that I want to be paid in a timely manner. A client can’t say that an invoice was lost in the mail if they have it sitting in their inbox, or vice versa. If I think a client may be dodging me in hopes that I’ll just forget about their invoice, that’s when I send another one – this time as a certified letter. Resourceful professionals will demonstrate that sometimes you’re going to have to get creative.

“I was once contacted by the president of a design firm who was owed a fair amount of money… I told her to go to the client’s office and sit in the waiting room until someone came out with a check. It worked.”

V.  Explore Your Other Options

“I have only had one instance where I turned a client over to a collection agency… much to my shock, I actually got the money.”

You do have options available to you if a client absolutely refuses to pay. Collection agencies, the better business bureau and small claims courts are a few of the options available to designers in such events. It’s best to weigh the cost and effectiveness of these and any other options available to you to find the one that is best suited to your needs.

Small claims court is a great tool for small businesses. When you get a judgement in your favor, the sheriff goes over and collects the money for you plus all expenses.”

What have you found to be an effective way of dealing with non-paying clients or your own invoicing troubles? Suggestions?
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Apples to Apples

This past December, I ran a poll that asked participants if they had ever worked with a freelancer, design studio or agency. It was conducted to gather more information about individuals and businesses went about deciding who they turn to – and who they weren’t turning to – for solutions to their visual communications needs.

As a follow-up that poll, in March: this time to gather more information about how individuals and businesses select creative professionals to work with. The poll asked this question: If you have worked with a freelancer, studio or agency in the past, what factor(s) influenced your decision to work with them the most? Here are some of the findings:

  • One half of the participants either hire creative professionals based on their prior experience/history with them and/or the pricing given for their services.
  • Nearly 40% of participants choose a creative professional based on the quality of their work.
  • 13% of participants specified their own reasons for choosing a creative professional for their design needs.
  • Based on poll findings, the reputation or recognition that a creative professional seems to have little influence on the individuals’ decision of whom to work with: no one specified ‘Their reputation’ as a factor in their decision-making process.

These findings support the fact that while many small and mid-size businesses may be working with larger agencies for help with their visual communications, they would benefit a great deal from working with a freelancer or design studio instead. Though the advantages are many, I’ll supply two significant reasons for doing so: the comparative abilities that many freelancers & studios possess, and the cost-effectiveness of choosing this route.

Abilities

The one great advantage of working with an agency is the large pool of in-house resources that agencies have to draw from for highly structured projects spanning specific areas of marketing, advertising and design. Unfortunately, if a client doesn’t necessarily need to draw from all of the resources an agency represents, they may still be paying for them – or at least their associated overhead costs – in one way or another. This is where freelancers and design studios exhibit a great advantage. Seasoned, experienced freelancers and creative professionals that work at or own design studios are often resourceful, well-connected individuals with a large pool of resources to draw from on an as needed basis. They may not be your ‘one-stop shop’ for all of your creative needs, but they still have the ability to find quality solutions to your communications objectives through one of their many outlets.

Pricing

A survey conducted by the American Association of Advertising Agencies (2008) concluded that large American ad agencies billed clients on average $974.00 an hour with smaller agencies (50 employees or less) still charging rates of nearly $300 per hour. It shouldn’t come as a surprise if you’re ever visited an agency in person, but at these rates, you’re not only paying the salary of the chief creative director handling your project, but a multitude of agency overhead costs as well. Considering all the additional expenditures and overhead agencies accumulate in daily business, it’s no surprise that many existing and emerging small business owners can invest in the talents these agencies have to offer. The costs involved become the key proponent of the process, rather than the value that the work can and should bring to their business.

Inversely, the hourly rates of solo practitioners/freelancers are considerably lower than the rates of creative professionals working at agencies. According to a survey conducted by HOW Magazine (2007) these groups are charging just south of $70 for their services, with the lowest average hourly rates around $27. The report also indicates that freelancers working in the Midwest (myself included) offer some of the most competitive rates in the country, charging on average $65 per hour.

Why the difference in price?, Is it because these professionals are less experienced or skilled in their craft? While there’s bound to be a bad one in every bunch, just as there is in every field, this difference in price is due largely to the fact that many freelancers choose to work from home or a smaller office, giving them the ability to keep prices low due to minimal overhead costs and passing on considerable savings to their clients. When compared to the rates given for agencies both large and small, business owners and individuals should not only be more comfortable with these rates, but can also focus on the value of the work a freelancer or studio represents, instead of the price tag associated with their services.

Given some of the advantages of working with a freelancer or design studio, why aren’t more businesses, both great and small, giving them more consideration? The value and quality of work freelancers and studios have is shared equally with their agency counterparts and the hourly fees serving as a basis for much of the work they do, along with low overhead costs indicate that they’re an affordable alternative for any sized business.

In conclusion, it makes sense to do a little research and find the right fit for your businesses’ visual communications needs before jumping right to what seems like the obvious solution. For many small businesses, the solutions to your graphic design needs can be found in working with a studio like Scott Creative, or one of the many other established, well-respected solo practitioners and graphic design studios that are bound to be in your area. We can save you both time and money while providing the value you would expect from working with a larger agency.