2

I have a client who always pays my invoice around at least 1 month after i send it. This is very inconvenient for me as i, a one-man company, heavily depend on this money to be able to pay my bills etc.

I tried communicating with the client about this, and this resulted in the next invoice being paid a bit earlier, 2 weeks after i sent the invoice, but the invoices after that took 1+ month again. The client is a big company in a branche where it seems to be completely normal to pay so late. They even said they normally pay 2 months later.

My idea is now to send an invoice at the beginning of the month, for hours that i will work that month for this client, so basically hours i haven't worked yet. This is definitely a good solution for my problem cause the hours i work for this client are very predictable and even if it happens one month that i charge for let's say 40 hours and actually work 36, i can even that out the next month. It's a longterm project and i can decide myself how many hours i work for this client so it is very predictable.

But is this ethically ok? Would love to get some feedback and different insights! :)

Improve this question
1
  • You'll probably get a variety of answers here. I wouldn't charge for work I haven't done yet -- what happens if you get sick and can't do the work you've already invoiced for & been paid for? Having consulted for 20 years, the general approach most successful consultants use is (1) have multiple clients / projects that are staggered, (2) try to negotitate different payment terms (e.g. net 15, etc.) These are easier said than done, one of the reasons most people aren't cut out for freelancing (not talking about you specifically)
    – Dan
    Mar 20 '20 at 18:29
3

Most corporations or business use net 30 for payables. That is, they always pay 30 days after receiving an invoice. This is pretty much standard and you should honestly expect 30 days between invoicing and payment.

That being posted, if you add something such as "net 15", "payable upon receipt", or add a late fee line to indicate after X days late fees will be applied, to your invoices it may speed the payment process.

All in all 30 days is how business is done in most instances. If you want less of a delay, you can start asking for deposits up front.

Fabricating work hours is unethical and should never be done.

You may want to discuss a retainer with the client. They pay you a specified amount each month for a specified number hours. This would allow you to invoice prior to work actually being completed. This is similar to your "idea" but is upfront, honest, and ethical since the client would be fully aware they are paying you for work to be done as opposed to work completed.

Quite honestly it simply sounds like you manage money poorly. You should always be 30 days out from needing any payment (if not much, much more). It should really never be an issue if a client takes 30/45 days to pay an invoice as long as you know they will pay.

Improve this answer
6
  • "if you add something such as 'net 15', 'payable on receipt'..." - true, but this would need to be agreed beforehand by both parties
    – Erik Erskine
    Mar 30 '20 at 11:53
  • 1
    Not necessarily. Especially where Net 15 is concerned. "Payment when services are rendered" is the default position for most transactions. Net 30 is simply how most accounting departments treat things.
    – Scott
    Mar 30 '20 at 18:32
  • @Scott where is this normal? I always received payment within a week or so, working in German for small businesses. Except for one case, where I didn´t receive payment at all and client got bankrupt after some month.
    – Daniel
    Apr 10 '20 at 23:20
  • @Daniel it really depends upon the company (client). The larger the company, there's a higher probability that they treat everything as Net 30. They don't have to... but it's very, very common with larger corporations.
    – Scott
    Apr 10 '20 at 23:22
  • 1
    For some companies standard is pay immediately. For others it's Net 15, and for others still it's net 30. If you want to specific payment terms, do so in a contract. Otherwise you will be subject to their standard procedures.
    – Scott
    Apr 10 '20 at 23:37
1

I've been freelancing for a little over twenty years now and sadly this is a very common occurrence. At one point, I had some contracts with the US federal government and it was quite standard to pay every three months. Then I had a couple of clients that were just incredibly unethical and often didn't pay their consultants at all. Fortunately, they were scared of me so they paid... but I would go three months in NYC before I got paid for even one month. I do understand where you are coming from, but I have to say that I feel it is unethical to pad your hours and can blow up in your face in the long run. If they ask you to justify those hours, the lie just grows and grows. While that is unethical... I see nothing wrong with charging them a late fee. That could also blow up in your face also if it makes them angry... however, it's better than lying to them about the hours that you have spent. Best of luck!

Improve this answer
1

Be transparent with the client and any mutually agreeable payment arrangement is fine, ethical, kosher, however you wanna call it. My mom is an accountant and a couple of her small business customers have been really slow payers in the past, now they have to always have a certain amount of advance payment on deposit with her before she'll work on their files.

Improve this answer
0

Is this really a late paying client? You should find out what the statutory payment terms are in your jurisdiction. 30 days doesn't sound uncommon (for example, this is the case in the UK).

These terms define when the invoice is actually due, unless both parties have agreed something else beforehand. Now you have an objective meaning of late payment, one that isn't based on anyone's opinion.

Suggestion: Invoice more frequently. You reduce the outstanding debt at any one time, and it's easy to implement: you don't need to ask for anything upfront nor negotiate special terms.

But to answer your question in the title:

Is it ok to charge for hours I haven't worked yet?

Yes, it's fine if you're honest about it. But it changes the arrangement with your client from paying in arrears to paying in advance. You'll need to justify why that benefits your client. The advice on retainers in Scott's answer is good.

Improve this answer
0

Cash flow is the hardest part of small business. Probably the reason most businesses fail. Net30 is standard. Bigger the company the longer it takes as there are more steps in getting the checks out. You can work with deposits or a monthly retainer on an annual contract. However, if the client always pays - it might not be worth starting trouble. Other things to consider to manage cash flow: build up your cash (obviously), get a credit line (always good to have for emergency), use faster payment methods (credit cards), use online invoicing systems for faster response, and or bill more frequently.

Improve this answer

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.