Why is it that creative businesses (mostly independent freelancers) find themselves on the short end of the stick when it comes to getting paid in a timely manner? My voiceover friend Paul Strikwerda discussed this phenomenon today in his Nethervoice blog – http://www.nethervoice.com/2013/09/18/when-a-client-owes-you/
Why is it that the sub-contractors have to wait for their money until the prime contractor gets paid. This is not the way it is supposed to work. Paul postulates as to why we find ourselves in this position of being the tail on the dog when it comes to getting paid.
When I was an active video producer, I mostly worked in-house or for a large production company and didn’t have problems with getting paid for what I did, or paying the people that worked for me. There was a much larger machine chugging along with enough accounts receivable to cover the costs of the jobs. I just didn’t ever think about it. I worked. I got paid.
But when I became a freelance producer of corporate video, I quickly learned that I needed to have a lot of reserves in my bank account in order to make sure I had enough money to pay my sub-contractors in a timely manner.
It never, never, never occurred to me to delay payment to a sub-contractor until I got paid. I knew that I had to have enough reserves to be able to pay the people I hired even if I didn’t get timely payment from the person that hired me. I quickly learned that I didn’t like being the bank, and stopped freelance producing.
But as I developed my own personal freelance voiceover business, I soon found myself in the position of being the person waiting to get paid, because the person that hired me had not been paid yet.
This is really no way to run a business. Some of my agents even operate this way. Was it always this way? Is it just with the creative, freelance businesses? Is it because what we do isn’t life and death. You can get treated in an emergency room without paying for the service immediately. But if payment isn’t made in a timely manner, the screws will start to turn.
As a small one-person shot, our leverage is pretty weak. Read Paul’s blog to get his take on why freelancers are “Easy Targets.
Learning to trust your gut and how to use the word “no” are important skills for the independent business person. We don’t know when the next job will be coming. We need to be sure that we are not waiting for it in desperation. Desperation frequently leads to bad business decisions.
I suppose I am one of the lucky ones. My business is – at the moment – ahead of the curve. If someone delays payment (for whatever reason), I am not at risk of losing my house. And there HAS been a bit more delay in payment in the past year or so. Some of which is due to poor invoicing on my part. Some is due to hard economic times. Some is due to internal movements in large companies. Some is due to people waiting to get paid before they pay me.
So, what to do about it? That is the question. One thing about a union contract is that this is not going to be an issue. The producer has signed a contract agreeing to pay you no matter what happens to their accounts receivable.
At this point in my own business, I simply need to make sure I discuss the payment terms ahead of time. Ask the hard question – are you waiting to be paid before you pay me? And if the answer is yes – be prepared to say “no.” Be prepared to ask for money up front. Be prepared to ask for money before final files are delivered. Be prepared! Do I do this? Most of the time I do not do this. But most of my clients are repeat clients and referrals from trusted clients and respected friends.
So, anyone up for a hamburger? I’ll gladly pay you on Tuesday after I get paid for that job I did 3 months ago.
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