However I have found that if your late fee is high, they will simply pay the invoice and "forget" the late fee. And then you're left squabbling over the late fee, which is quite annoying.

Also note that I disagree with OP's interest scheme - in my case its a flat 1-2%. For a freelancer you don't want to tip the scales into lawyer-worthy disputes...

I would suggest that you simply take 50%, or some other large portion of the project, up front. Then, as you near a milestone, ask for another piece of it.

Billing at the end in one large chunk and then charging enormous rates just means you're not de-risking on the on set, and you're screwing a customer relationship.

Also, industry norms are NET 30, and some customers may even operate, and push, on NET 90 terms.

I haven't had ANY issues since I made it clear that I'm selling my time and not a certain product, and that clients can see their current budget usage at any time. My current 6 month contract pays me in advance for 80 hours, and when he's about 20 hours from needing to fill up the tank again, I invoice him.

Over the last few years, I've spent WAY too much time chasing after money. I'm tired of it.

Noom/Worksmart Labs would often "forget" to pay me some months, or "accidentally" pay me too little other months. They messed up paying my gym benefit for months once and I took over, then they argued for 10 emails and a a meeting when I asked them to contribute any amount at all. They'd frequently agree to do things like update the address I was paid at which I needed for immigration paperwork, then never do it because they wouldn't pay their accountant either. It was just hell working for them, and switching to other companies has been great. I actually get to focus on work instead of spending all my time seeing how the company is going to try to cheat me next and dealing with it.

If you get into paying late / non-paying scenarios, the main thing you want is leverage and in most cases this is the strongest leverage you're likely to be able to gain.

Dude, these are your CUSTOMERS. Yes, don't be a doormat and YES it sucks waiting 3 months for a check when you expect it in two weeks. But sending 10% a week interest notices for being as little as 1 day late is going to backfire on you. No matter how great you are.

And what will potential customers think of blog posts like these...

However, he said that there's a legal limit (in the US?) for interest rates you can apply to an invoice. Does anyone know the validity of this?

Edit: I should add, that if you're doing freelance for a small/start-up-ish/mom-and-pop company, it might be beneficial to get some form of retainer to do some work if you can negotiate that. Or, just stay away from this type of work all together if you can, as this is where I found most billing issues/collections in the past.

As an aside, I don't think your abusive penalty would be enforceable (in the UK anyway).

I would never agree to your terms.

That seems to be enough incentive for a lot of places to pay early, particularly smaller businesses who aren’t on some fixed schedule run by a central accounts department. That in turn reduces the risk to my company, because typically we’ve only worked a little over a month before the corresponding payment reaches the bank, rather than having two full months of revenue at risk if anything unfortunate happens to the client.

Obviously this is all agreed up-front and terms are always negotiable, and for some larger companies this sort of scheme doesn’t help because you’re often looking at a longer payment window anyway. In that case, the basic rule is that the longer the window they want, the more the basic rate goes up and the bigger the up-front deposit before we start work.

My question about this method is more about practicality than anything else. Has the OP actually tried to enforce this? It's hard for me to imagine presenting an invoice for 150% of the original and not have the client fly off the handle and make things much worse.

edit: He also covers a lot more ground in terms of negotiating, having a contract, etc. Well worth the 38:40 to watch.

edit2: There's also a book - Design is a Job - which goes into even more detail. I have it, it's pretty good.

Interesting how that works.

That said, I have never been able to collect payment upfront because I don't have a personal business and do things as an individual (there's some bureaucratic crap that prevents upfront payments for normal authorship contracts in Slovenia). And I have never not gotten paid completely, it can just sometimes take a few months longer than I would like.

That that said, circling back to my main marketing vehicle - the blog - building that has helped me be very picky about the clients I work with, which lets me avoid a lot of the problems.

I suppose, it a personal decision, depending on what we are prepared to do and accept. Some people may be quite happy to chill out and wait, some need the money asap.

I'd like to see his full contract.

If anybody knows of "really good" rather than just "reasonable" contracts for programming contract work (perhaps involving retention of copyright/similar if client doesn't pay in a timely fashion), I'd love to see them. Please link.

Received payment that day.

Kill switches work wonders.

What you should do is charge enough up-front (as a fraction of the invoice or a flat number) and bill frequently enough that a client stringing you along for a bill doesn't really hurt you.

You should also have a few clients going at once so that a few weeks late doesn't mean a few weeks of lost work, because at the first sign of a late payment you switch to other clients.

And for your regular clients, especially ones that have trouble paying quickly (perhaps due to corporate policies), ask for a retainer so you can keep their projects at a high priority without sticking your neck out.

Professionalism and respect go in both directions. Even large companies don't necessarily have a team of people dedicated to paying your bills instantaneously. If it's a good relationship and they value the project and you make it known that prompt payment is necessary to meet the schedule, they will pay promptly. If not, then no amount of punitive late fees will change that.

With your system the longer the client doesn't pay the invoice the less likely he is to pay at all. Why is this a good system?

Are you going to write a blog post regarding your opinion on kill switches? I would be interested to read that :)

Why is your CSS in the head of each page rather than a separate file?

You rolled your own blogging platform because you think wordpress, drupal or joomla are over the top. Your website is using drupal, wouldnt it be less effort to just use a drupal blogging module rather than have a separate system?

Late-paying customers are just part of business.

Such practices are flat-out illegal in some jurisdictions.

For many people in a position of hiring contractors to do work, there are times when an invoice can sit in an inbox -- physical or otherwise -- for more time than that before even being opened, much less acted upon via a process that often involves multiple other people.

Most companies I've experienced would respond to a demand for a 50% late fee by paying the exactly the original amount, exactly 30 days after invoice, and simply never work with you again.

I even once had a small restaurant owner ask for $750 back (after work had been performed) because his refrigerator broke and he needed money for repairs.

The types of clients who won't pay are generally not worth working with, and it takes time/experience to spot them before signing to work with them.

"Just pay me" is one of the reasons we're starting matchist (matchist.com): no more problem clients for quality developers.

In a typical multinational company there is an annual DPO (Days Payables Outstanding) goal, that shall be achieved no matter what. So unless a vendor has monopoly or has unique product/service, such approach will not fly [unless all such vendors have the same terms].

So if all software developers are using 30 days or 60 days terms, 10 days will not fly.

Until then, I would recommend a more constructive approach - use factoring. Don't know the cost in US, but certainly less than 10%. Increase your price by the factoring charge. Note that this might require you to update your contract and include right to re-assignment [check with legal person].

There's also nothing wrong with actually paying them a visit and politely demanding your money (only if they're in town of course). This can make you seem a bit more like you actually exist and you're not some piece of paper asking for money.

One of the big things that has helped me is to include a clause in my contract that says "I'll deliver code when final payment is received." This mitigates a lot of trouble and usually helps to secure payment a lot quicker. The only caveat on this is that for client's whom I've developed a relationship with, I tend to ship code before final payment with a net fifteen window on the invoice.

I also think that 10% per week late fee - though I certainly understand and sympathize with a freelancers grief - it gives me a somewhat unprofessional impression of a freelancer who is either not financially stable or just vindictive. When I hire somebody I like to feel that they will be around next month. A more friendly approach with long-term benefit is to just stop working with clients who don't pay on time.

To make your life more stable as a freelancer I can say from experience that you want to obtain repeat clients as soon as possible - clients who want you to work on either retainer, or at least agree to some minimum amount of hours per month. Over time get rid of clients that don't pay on time or are problematic in other ways. Once you get past that point freelancing can be a really enjoyable and profitable to earn a living. Until you get there, though, you can tend to spend a decent amount of time haggling and arguing about money with your clients.

1. The default terms are exactly that. Default terms. They will be discussed with clients before a project starts, and we will negotiate terms that suit us both. Think of it like asking for all the brown M&Ms being removed from a rockstar's rider. If a client is unwilling to discuss terms with me or unwilling to negotiate for their project, then either the project will proceed with these terms, or I may refuse the project entirely.

2. The actual wording allows me to implement the penalty at my discretion. I've had a couple of late payers, and often just the mention of the penalty will prompt them to pay. I'm not trying to destroy client relationships here - I just want to get paid.

3. A penalty for late payment isn't the only protection; that would just be stupid. Aside from contracts, I am very willing to refuse working for clients who I don't trust to pay on time.

4. This isn't something that I will just spring on a client at the invoicing stage. Yes, it's copy on my invoices, but that's there to remind clients of the agreement.

5. Negotiation is important. I realise that this is a re-hash of point 1, but it bares saying twice. I have contracts with different clients where different terms are enforced. The point is that these are default terms, which are there to protect me and my business. They are my starting point for negotiation. So long as you don't come at me offering "I promise to pay you on time" as a point to negotiate with (you can't negotiate with promises that you should be keeping anyway), then we'll figure out better terms for both of us.

I am personally exploring a new twist in this process with the ability to force customer requirements into user stories and let developers charge for implementing a number of these stories in the same prepayment model.

hope this helps

Update: Having looked at your resumé, I probably wouldn't work with you anyway.

Communicate often. It helps.

(Perhaps the main avenue to a solution is in freelancers acting collectively somehow -- thereby becoming more powerful. If clients risk being unable to find service-providers because those clients have been blacklisted, they would more strongly feel the value in paying-up.)

I'm pretty sure that's much much more than the maximum rate permitted by law.

It's not worth the stress, trust me, I've been there. Full disclosure: I just joined the team as DoP.

For example, 2/10 net 30 means 2% discount if paid within 10 days, otherwise full amount due in 30.

Of course, in the end, you put what the law allows and your clients will accept....

If your clients can't get their act together in 10 days offered to work on retainer.