I think anyone who works for themselves long enough will run into a case of non-payment. It sucks. It makes you mad. It makes you feel betrayed. I have been fairly lucky, though, that in my three and a half years of working for myself there have only been two cases of this. The first time was in my first year as a freelancer and it was a half-day shoot for a company from Florida. Everything seemed legit, and it probably was. I imagine that nobody was setting out to screw me or scam me. But in the end, a few months after the shoot, after the tapes were sent to them, it seemed as if this company no longer existed. Their phone number was inactive, as was their web site, and I found a few other instances online of other freelancers discussing being shorted by this production company. It was a small enough payment that it didn’t seem worth pursuing further, and if I did want to, I would not have known where to start. The only thing that really annoyed me about it was that the shoot was on the day before Thanksgiving, on the first year that my wife and I were hosting my entire family, so I had plenty of stuff to do at home.
So today I discovered my (likely) second case of non-payment. It was for a company that I’ve done probably a half dozen shoots for over the last couple years. They certainly seemed to have their act together and I knew some of the people involved there. But I had two outstanding invoices for them (one dating about 8 months back) and over the last couple weeks I’ve made an effort to get fully up to date on any overdue payments. After several emails and voicemails I finally got someone on the phone who informed me that, just a few weeks ago, they basically filed for bankruptcy. Crap. She said she’d get me in touch with someone with more details, but when I asked some more questions it basically seemed like there is little chance I will receive my payment. In the grand scheme of things, this will not kill me or prevent me from feeding my family or paying my mortgage, but it’s still about $2K that I worked for and will likely not be receiving. What actually annoys me the most is when I equate it to gear. That could be a new MacBook Pro, or a nice lens or 2. Or a 5D camera body. (Or a whole lot of diapers for my soon to be born baby… although I really don’t think about it that way.)
I feel like, in a small way, I have myself to blame. I really should not have let an invoice go unpaid that long. I use (and highly recommend that everyone working for themselves use) some type of accounting software that monitors things like overdue invoices. I use Quicken Home and Business, and it tells me every time I launch it any outstanding invoices. (Clearly I will be paying more attention to that in the future.) While this program is quite deep, and probably took as long to setup and learn as Final Cut Pro, it links to every one of my accounts, and makes it nearly impossible to be “off” on your books. In my case, I find the only drawback to Quicken Home and Business is that it is PC only, so I have to run it on Parallels (a Windows emulator) on my Mac, and I find it to be somewhat buggy.
Some people will minimize any losses by getting deposits up front, but I rarely do that on small one or two day shoots, or with repeat customers. On big, ongoing jobs, though, I definitely break things up into 3 or 4 payments with some of it coming up front. Clients will probably not be thrilled if you seem overly demanding of immediate payment or receiving a deposit (as most companies pay out in 30 or 60 days), so it’s good to be trusting but also to be cautious. And definitely continue to monitor any payments that seem later than normal. In most cases a friendly reminder is all it takes to get a check out the door to you.
So I’ll pursue this a little further, but it may not lead anywhere. I’d be curious to hear other people’s stories on this issue, and if people figured out ways of receiving payment after a company files for bankruptcy.
Hi Ben –
Sorry to hear about this…In my work as a freelancer – I have always practiced the 25% breakdown.
25% up front, half way through, after the first or second round of notes, and before final delivery.
Working primarily as an editor – perhaps my projects stretch out longer, so that seemed more viable
without antagonizing the client (?)….. I wonder how clients would feel about “Watermarked” footage,
such that you deliver to them for “Review” — or even see the rounds of cuts – but when it comes
for them to get the goods — you have the leverage. My only other thought leans towards
communication and expectations right out of the gate. Whenever I submit a proposal, bid, or contract,
— I would always put my payment expectations right up front. Again – as an editor, I was always
protecting myself from clients who suddenly have their big idea (after 3 rounds of notes) — and I
need to explain that the budget included 3 rounds of notes – but now that there is suddenly “a new idea”
– this is now what we’ll call “overages” etc. Not sure if this is applicable to you — and of course,
this is not breakthrough information — but it has worked so far for me. That, and the vague threat of violence!
(no really…)
Those are good ideas. As I mentioned, on bigger jobs I do split up the payments into 3 or 4 portions (depending on the size and duration), but for a day or 2 of shooting it doesn’t make sense and I typically have to go on the faith of payment. In this case it was a repeat client too. I keep kicking myself for ignoring how long it had been because a couple months ago I imagine I would have been able to receive payment. Certainly if something seems strange, then holding on to footage makes sense or watermarking makes sense. With most of my jobs I actually hold all the raw footage anyway (if I am editing and shooting) so there is that added control. Unfortunately while you need to be cautious, you also need to seem trusting or else clients may get a funny feeling from you.
Bummer.
Trust and funny feelings are one thing, but simply put- business is business. You are a professional and part of your package is how you expect to be paid. Make your terms known as a matter of fact part of your presentation. Progress payments are standard operating procedure- use them to minimize risk. If a potential customer baulks at your terms, that’s a reliable indicator that getting payment from them may involve some angst or worse. One way to entice prompt payment and mitigate risk is to offer/negitiate a quick pay discount- say, 1-3% for a COD payment. (Some companies have a “pay all discounts” policy.) If you must extend credit, it’s entirely up to you to stay on top of your receivables. (If you don’t care, they won’t either.) Always be professional when calling on overdue invoices. Call the first day it is overdue. Ask for the Accounts Payable manager. Write down their name. State the facts- “I have not received payment for my Invoice #XXXX for $XXX.XX that was due on XX/XX/XX. Has that been sent?” Yes- great (watch your mail), No- Ask when you should expect to receive it. If you don’t receive it then, call the same person again…and again. If they can’t or won’t pay, you have to decide when and how to handle it.
Bankruptcies suck. I believe all transactions 6 months prior to a bancruptcy filing are subject to recall by the court- so when you’re paid prior to that the money is yours. After that, you may have to return it. As long as the court knows you are a creditor of a bankrupt company, you have a chance of collecting a share of what’s left in the end, if anything. Getting paid as quickly as possible is your only hedge against this.
Extending credit always involves risk.