Field Guides / Pricing

How do I get paid on time, and what terms should I set?

You get paid on time by putting the payment terms on the quote, tracking every invoice against its expected payment date, and chasing on that date. When I ran my production company, I normally insisted on 50 per cent up front, and I only gave a discount in exchange for something, usually faster payment. Set the balance on a date you write on the quote, and move the tax aside the day the money lands.

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Why do clients pay late?

Clients pay late mostly because of corporate payment policy and administration. Large organisations pay suppliers when they have to, and an invoice that doesn't fit their process waits.

Large corporations, certainly in Europe, make it policy not to pay suppliers until they have to. If you start working for them, expect a contract of services before the job, usually with a non-disclosure agreement, setting out their payment terms. Terms of 60, 90 or 120 days aren't uncommon, and the clock only starts once accounts has an invoice with the correct purchase order reference, completed the way they like. Get that wrong and you risk the invoice being rejected.

Cash is what keeps a business afloat, and plenty of businesses look profitable on paper and still go under because of bad cash flow. When there's no cash, the next call that comes in gets a yes at any price, because you can't afford to walk away from a deal that isn't in your favour.

How to set payment terms and get paid on time: the method, step by step

The fix for late payment is the terms you set and hold, in six steps: four before the work starts or the invoice goes out, one on the due dates, and one when the money lands.

1. Put the payment terms on the quote. When I ran my production company, I normally insisted on 50 per cent up front. The balance and its timing are yours to set. Write the terms on the quote next to the total, so accepting the quote means accepting the terms. The quote checklist has a line for them on the quote page.

2. Ask accounts what they need before you start. For any larger organisation, find out their supplier payment terms and what a correct invoice looks like before you agree dates. If their terms are longer than yours, you want to know before the shoot, and you want the first invoice to go straight through.

3. Send the deposit invoice the day the quote is accepted. One invoice, one line, referencing the quote the client accepted. Done looks like: the deposit is in the bank before you book a day for the job.

4. Put every invoice on a cash flow forecast. I use a simple sheet that lists the invoices sent and the date each payment is expected, so I know when cash is coming in and I'm ready to chase if a payment doesn't arrive. Add a weekly line for working capital: the cash that's yours to use once your bills and the money set aside for tax are accounted for. The columns below are a layout to start from.

5. Chase on the dates, in plain words. Send a short note a few days before the due date and another on the day. The timing is a suggestion, so pick yours and keep it the same on every invoice.

Once it's overdue, send the late payment reply in How to push back on a client without losing them. It points at the terms on the quote and asks for a date.

6. Set the tax aside the day the money lands. You're legally responsible for your tax and your VAT or GST. I've heard of many creatives who charge the extra tax, receive it with the rest of the payment, and spend it as if it were working capital. As soon as a payment arrives, move the VAT or GST into a separate savings account and ignore it, so the money is there when the quarterly bill comes in. Set aside your income tax for the end of the financial year as well. The rates and the rules are your accountant's call, so ask them for the figures. Done looks like: a separate account for VAT or GST, and a transfer into it on the day each payment lands.

When is it worth giving a discount for faster payment?

A discount on payment terms is worth giving only when the client gives something back, and the most useful thing they can give is faster payment. "You must create an incentive if any kind of deal is to be done, otherwise you are just knocking money off for no reason."

If a client wants a price break, I may agree a percentage off if they pay the invoice in full up front. It's rare, and I keep it as a negotiation tool. Your contact in marketing is bringing a budget in for their department, but accounts runs payment strictly, so to get a deal they have to go to accounts and ask for an exception that gets you paid faster. That makes it a good test of the relationship. If your contact can get you paid faster, it's a fair deal for both of you. If they can't, the quote stays as it is.

If the budget has to come down as well, take scope out first (Drop the scope, not the price has the method) and put the payment condition in the same offer.

A worked example

The worked example is a job of mine, with the client anonymised: what one waived deposit cost, and how the next job was traded for faster payment.

I once waited 96 days to be paid more than £76,000, purely because of corporate administration and bureaucracy. There were a lot of hard production costs to cover, so I was significantly out of pocket. I'd waived the deposit because this was a trusted client I'd worked with for more than ten years. It pushed the relationship a little too close to the edge for my liking.

The next time I worked for them, they wanted to bring the budget in £6,000 under my quote. We cut some shoot days and reduced some post-production time, and I said we could do it if we were paid in 45 days. At first they said it couldn't be done, so I said no deal. After a few days they found a way to pay me through another supplier they used, who was already set up on a 30-day payment contract. It took a bit of persuasion, but I was paid in 45 days.

The mistakes that undo it

Two mistakes give money away before an invoice is even sent, and both start with the promise of future work.

• Working free in the hope of being paid next time. The client who gets one job free is shocked when you start charging: "but you used to give us that for free". People who do free are not valued.
• Giving a discount on the promise of more work. The pitch goes: "If you could do us a deal on the pilot, when the series comes in you'll get first shout and we'll have a proper budget." In all my years in broadcast TV, the pilot budget never went up when the programme was commissioned. Corporate clients offer the same lure of more work, and it almost never comes to anything.

The rule of thumb for getting paid on time

Agree the terms before the work starts, and only move on price in exchange for faster money.

The benchmark: 50 per cent up front as your default, and every open invoice on the forecast with an expected payment date.

Hold yourself accountable

Which of these have you taken on or put in place recently?

• Your quote template carries the payment terms paragraph, with 50 per cent up front.
• Your last job started after the deposit was in the bank.
• Every open invoice is on a forecast with its expected payment date.
• Your last invoice to a larger organisation carried their purchase order number.

Your one move this week

What's the one thing you can commit to implementing this week? If you're not sure, start here.

Paste the payment terms paragraph into your quote template with your own balance terms. Then list every open invoice on the forecast with its expected payment date, and send the before-due reminder for anything due in the next seven days.

One thing executed every week creates 50 strategic moves a year.

Related tools and guides. The profitable quote checklist, How to get paid for everything you deliver: the scope checklist, How to push back on a client without losing them (the late payment reply), Why knowing your numbers lets you price with confidence, Drop the scope, not the price.