What I’m listening to: I Don’t Wanna Lose Your Love by Santana with Los Lonely Boys
I was reading Jake Poinier’s posts on both the Mode Media bankruptcy and his own experience with a client declaring bankruptcy. It’s a lousy position to find yourself in, and it’s then that you scramble to learn all you can about avoiding what usually turns out to be a total loss of invoiced income.
And you learn. I did.
In my case, it was a magazine I’d worked with repeatedly. There were no warning signs until the day the editor wrote to me: “Just letting you know that the company has filed for Chapter 11 today. Not sure what that means for any of us, but please send your invoice over again and I’ll see if I can get it through.”
What it meant was she lost her job and I lost $400. Despite having done exactly what Jake’s post suggested, I got nothing. No wonder — the list of creditors was long and expensive. I was small change. If you don’t know already, bankruptcy proceedings start the payouts at the larger amounts and then work down as far as the cash will cover. Not sure if that’s every time, but in my case, that was the process.
Thankfully, it was only $400.
One things stood out in Jake’s recent post — there were freelancers who were owed as much as $40,000. Right there. That problem, in my opinion, lies with the writer. Jake pointed out that writers should “stop work till they get current.” Damn right.
Here are a few other safeguards you might want to start practicing, too:
Set – and adhere to – a maximum amount owed. Suppose that writer who’s owed $40K had set a threshold of $5K in outstanding invoices for one client. How much less would that loss sting right now? Set a figure right now in your brain (and on paper that you paste to your monitor) of how much you can afford to lose should that client never pay. That’s actually what you’re doing — you’re determining how much money you’ll have to walk away from.
Limit how much work you’ll do when money is still owed. Jake said it, and it bears repeating. Had that writer seen one or two unpaid invoices (or even three) and said to the client “I can’t start/complete any other projects until the invoices are paid”, that writer would be heaving a sigh of relief right now. Get in the habit of halting work until the checks/direct deposits arrive.
Get that upfront payment. Yes, even with a magazine. See, Mode Media was an online presence. Whether they call themselves a magazine or not is irrelevant. There’s no reason why a client can’t build a trust agreement by offering an upfront payment. “But magazines don’t do that,” you say. “I’d lose them as a client!” you add. And if you worked for Mode Media, today you’d be happy to have lost them, I suspect. Magazines don’t do that because writers don’t ask. Either ask or refer to points one and two of this post.
Have clear payment processes spelled out in contracts. And expect every client to sign a contract. This helps in the event that there’s a bankruptcy. It gives you proof that the work was ordered, agreed to, and that payment is expected. It may not result in full payment, but it gives you a stronger case should a bankruptcy court be deciding who they’re paying first.
Writers, have you had a client either not pay or go bankrupt?
What’s the most any one client has ever owed you?