In 2001, Daniel Pink predicted in his book FREE AGENT NATION that more of us would be migrating to contract assignments vs. being traditional full-time employees. Pink was on the money.
Unfortunately neither he nor many free agents anticipated the difficulty they were going to experience collecting the money once the assignment was completed. However, I have discovered through trial and error how to prevent most of this problem and manage any foot-dragging on accounts receivable quite effectively.
In CRAIN'S NEW YORK, Daniel Massey reports that getting stiffed has emerged as a major problem among independent contractors in the state of New York. A study by a Rutgers University economist found, Massey tells readers, that 42% of them "reported having trouble collecting payment for their labors last year, totaling an estimated $4.7 billion in lost wages."
Four years ago, I was left holding the bag on $800 on a account receivable for ghosting about 500 words of commentary on a political issue. As C.S. Lewis has noted, experience is a brutal teacher but we learn, boy, do we learn. I learned from that [emotionally] brutal experience. Here are some of things I discovered and have implemented. I haven't been "tricked" out of my money again.
- Screen prospects before agreeing to work with them. In this volatile economy, the turbulence of which will continue, you have to kiss a lot of frogs because you decide you can settle down on the pod and make music together. What to look for? In addition to, of course, chemistry, if it's a big job it's worth doing due diligence on their financial condition. Yes, it's appropriate to say: you do not have the budget.
- Be all business. Actually, that will bring in more assignments since the new breed of client is hyper-cautious. Friendly, nice, traditionally feminine, and too interested in their troubles only send the wrong messages. Since 9/11, clients want only the service, hold the relationship.
- Have a PayPal account and request at least a third deposited before work commences.
- Put the terms and conditions in writing. That means specifying one draft and one revision.
- The prospect should be aware that you have the resources to not only collect on the account but also make your grievance known in the industry. The latter could happen through simple word of mouth, as in wondering aloud about the client's cash flow, leveraging social media, and tapping media connections for them to do an interview with you on this pressing problem.
- Interview collection agencies regularly. Some are quite adept at calling on the miscreant's organization in-person and asking how things are. Those collection agencies are worth every buck we pay them. Two decades ago one collected money owed me by LEAR'S MAGAZINE for a speech.
- It's okay to let small amounts go. In fact, when a client becomes abusive, to protect myself emotionally I frequently terminate the relationship and inform them to kill the invoice. The game is about presenting ourselves from a position of strength. We can't do that if we're preoccupied with $350 or if we are being treated badly. For the kind of compensation paid in financial services, sure I would absorb getting roughed up. Wall Street knows that and that's exactly why such amazing behavior goes on and is tolerated.
What might also be helpful are the kinds of mindsets and behavior I recommend in my book OVER-50: HOW WE KEEP WORKING. It's in paperback and online. Here, free to download, are the Preface, Introduction, and Table of Content Download Over50prefaceintrotoc.