Billing for Sole Proprietors: How to Get Paid On Time

My daughter, a chef, is dipping her toe into the waters of entrepreneurship by accepting occasional catering gigs. A few days ago she said something that showed me she’s learned what you already know if you’ve been operating a service business for a few years: “You can’t just do the work and, like, automatically expect to get paid.”

The fact of the matter is that getting paid often takes work. In this post I’m going to focus on the basics of billing and getting paid as they apply to sole proprietor professionals -- freelance writers, gardeners, wedding planners, architects, and Web designers -- anybody who more or less works alone as a contractor or service provider.

Here are the rules:

1. Agree on a price. This may seem obvious, but it’s amazing how many payments get delayed because the client gets a bill that contains a surprise. I won’t go into the details of bidding today, but it’s important to cover basics like how many hours you’ll work, what will happen if the job takes longer than expected, and how you’ll bill for supplies or third-party fees (e.g. plants or fertilizer if you’re a gardener, domain names if you’re a Web designer).
2. Bill part of the project upfront if you can. This is a tricky area that’s not always in your control. For example, if you’re contracting with a big corporation, whether it’s for landscaping or software engineering, you’re probably going to have to play by the corporate rules or turn down the job. On the other hand, there are many situations where the only thing you have to do to get paid one-third of the bill upfront is ask for the money.
3. Send your invoice immediately after the work is completed. If you have several months’ income in a bank account or are married to someone whose income covers the monthly bills, this isn’t so important. But if you’re counting on checks to arrive quickly to cover rent, car payments, or a mortgage, prompt billing is essential. In my opinion, billing once a week is the worst case scenario. By the way, this isn’t only about cash flow. What happens if your customer suddenly goes out of business? Even a day can sometimes make a big difference in business.
4. Make it easy for people to pay you. Big corporations usually have specific rules about how they want to be billed. Follow them! Some are obvious, like including their purchase order or job number on your invoice as well as your own. Others may come as a surprise. Not long ago I billed a large corporation for a writing project. One of their requirements was a day-by-day summary of the hours I’d spent. The hours summary and the invoice didn’t match -- one was 50 cents higher than the other -- and they kicked it back.
5. Always put terms at the bottom of the invoice. Mine usually say “Terms: Net 30,” which means you expect to be paid in full (net) in 30 days. Some smaller companies automatically pay based on what you say.
6. Track your receivables. Follow up by e-mail as soon as your check is 2 days late (32 days if you’ve billed net 30, e.g.), and include a copy of the bill marked “COPY” at the top. Follow up by phone at 45 days -- or even earlier if you’re pressed.

I can’t guarantee that following these rules will ensure prompt payment, but they’ll definitely help.