Artwork donated by Pati Nagle.

The Freelancer’s Survival Guide:  Employees Part One

Kristine Kathryn Rusch

Really, this section shouldn’t be titled “Employees.”  It should be titled “People You Hire To Do Stuff For You.”  But that’s too long and a little too wordy, even if it is accurate.

You see, the word “employee” has a specific meaning in the culture and under the tax code.  According to the dictionary, an employee is someone who is paid by someone else to do work.  Which is a lot like people you hire to do stuff for you—just as wordy and almost as vague.  (Maybe I should have written “to work for you,” but I digress.)

In the culture, however, an employee is someone who goes to your place of business and works for you there.  You schedule that employee for a certain number of hours, pay that employee a set wage per hour or a set salary, deduct all the applicable employment taxes, and give that employee a few perks like a paid vacation or sick leave or a bonus. 

To the IRS—and remember, I’m not a lawyer, a tax accountant, or even a tax expert—an employee is someone who does their work at your place of business (or your home) for set hours and a set rate of pay.  This can get dodgy, and we’ll get to that later.  But there are strict rules in the tax code that define employees, and if you ever hire someone, you’d best check out what those rules are, in case you need to follow them.

Because the word “employee” has so many fraught meanings, I’m only going to use the cultural one.  For example, Dean and I have no employees—at least this year.  However, we hire a woman to clean our house weekly and a gardener who beautifies our yard biweekly.  Tomorrow, we’ll hire movers to lug books and furniture from one building to another.  In May, we hired a real estate agent to sell two of our properties, and I hired a literary agent a few years ago.

Actually, I’ve hired several literary agents over the various decades, and I’m not sure I can give you an accurate count of how many literary agents actually represent my work—not without some research, considering I have an agent in every country in which I’m published, plus a few in countries where I hope to be published.  I have had, over the years, a Hollywood agent as well as a series of lawyers for a variety of different tasks, ranging from divorce to incorporation to real estate.

So how many people currently work for me? Dunno.  Two more tomorrow than today (those movers) and two less by the weekend than tomorrow (again, those movers).  If I had to give you an educated guess, I’d say that I have seven people working for me in the United States at this very moment.  (More like twenty people, if you count all the folks who are working for me overseas.)

None of these people are employees by IRS rules.  Most are consultants or people I hire for a specific task (the movers).  Most of the house cleaners I’ve had over the years are employees of some other business—a house cleaning business that I hire, just like we’re hiring those movers through a moving company.  The moving company handles all those nasty employee taxes and the IRS rules, and those fees are probably included in the hourly rate I pay to have those two strong guys to lug boxes of books from one building to the next.

But…I have had real employees, as many as nineteen, back when Dean and I owned Pulphouse Publishing.  Only a few years ago, we had a fulltime employee at the collectibles store.  That was a condition of deciding to own the store—an employee to handle the traffic, so we could travel and continue writing.

With that employee came all kinds of pain in the ass stuff like the aforementioned taxes and IRS documentation.  You could spend two hours per day filling out forms, if you’re so inclined, which we weren’t. So we hired a payroll service to handle all the employee payment matters. We could have hired a bookkeeper, but the service was cheaper.

Back when I was an employee, I handled the employment taxes and all of that stuff for my employer.  (Yep, dyslexic old me.  That worked well [and yes, that was sarcasm].)  It was that experience that made me a convert of temp services, employment companies (like moving companies), and payroll services.

Anything to avoid filling out those forms ever again.

But I get ahead of myself—although not by much.  I needed to establish my employer credentials before I write this part of the Guide.

Because this first section of the employee section should help you decide when (if) you should hire an employee.

The real answer to when you should hire an employee is never.

Labor costs are usually the greatest expense in any business.  The problem with employees is that they’re people.  They’re people you’ll get to know and probably befriend despite your best efforts, so even if they cost you more money than they’re worth, you’ll be loathe to fire them or lay them off when the time comes.

So…you’re better off doing the work yourself.

However, that’s often unrealistic.  Most businesses need a few employees to run efficiently.  And it’s a balancing act to figure how many you actually need.

Most employees want to do the minimal amount of work for which they’ll get the most amount of money.

Most employers want the maximum amount of work for the least amount of money.

You can see the conflict here.

Most first-time employers believe that an employee will work as hard as the employer does, which is a huge mistake.  Clearly, most employers don’t remember their own employee days—days when they arrived at work exhausted, left early, got the minimum done (or less than the minimum) and foisted the bulk of the job on someone else—or worse, didn’t do it at all.

Here’s the most important thing to remember about anyone you hire for any task:

No one else will care about your business as much as you do.  No one else will work as hard as you do.  No one else will ever have as much at stake in your business as you do.

If you remember all of that, you might survive having employees.  But if you forget it, you could be in big, big trouble.

So let’s deal with the tough question first:  When do you need an employee—and by employee, I mean the kind that the IRS recognizes as an employee.

You need an employee when you can no longer function alone as a business operator.  You need help to run the day-to-day aspects of your business.  You need to be in two places at once, each and every day. 

If you have more work than you can possibly do by yourself, even putting in extra hours and streamlining your production, then you’ll need an employee.

The first thing you need to figure out is whether or not your need is permanent.  Are you in a busy cycle that will go bust in a few short months?  Or has your business increase become a fact of life?

If it’s a busy cycle, you can (and should) hire help through a temp agency.  The agency will vet the employee, pay the employee’s wages and taxes, and make sure the employee meets your schedule.  Should you dislike this employee, the agency will provide someone else.

That’s the best possible short term solution, and something you should do before you ever hire an employee yourself. 

Because too many small business owners hire an employee only to discover that they hate having someone else on site.  Or there are other problems, which we will get to later.

But let’s say you’re not on a busy cycle. Business has improved enough that you can’t provide the same quality product (or service) without some help.

Now you need to figure out if you need full or part-time help.  Be conservative.  The fewer people you hire means the fewer people you fire.

Yep, you’ll fire people.  You’ll lay them off.  You’ll cause distress in their lives—and in yours.

I’ve fired more people than I want to think about.  I even fired volunteers, back when I worked for the listener-sponsored radio station.  And why would you ever fire a volunteer—someone who gives of their time and talent?

Often, I fired the volunteer for cause: they stole from the station, they repeatedly insulted or abused the other volunteers, they repeatedly said inappropriate things on the air.  But twice, I fired volunteers for not coming to work.  Go figure that.  Those two people volunteered their time, made a commitment, and then didn’t show up.  When they did bother to come to the station, they were offended when we (in the form of me) told them we didn’t need them any more.

After doing that at the ripe old age of 23, I thought I could fire anyone.

I was wrong.

It’s different when you fire a friend or someone whom you like who simply can’t perform the job at all.  And you will fire people.  People who embezzle.  People who don’t bathe (yeah, let that person go—that was an uncomfortable conversation).  People who show up late every single day.

Worse than firing, though, is laying someone off.  Income necessitates layoffs—or to put it more clearly, lack of income necessitates layoffs.  Consider that 600,000 people lost their jobs to layoffs in January of this year alone.  Most of those companies that laid the employees off still exist.  The companies were just trimming their bottom line—because as I said, the biggest expense in most businesses is labor.  People, in other words.

People with sick kids and elderly parents.  People who do their jobs well, but cost a lot of money in wages and benefits. People who have mortgages and car payments and grocery bills.  People whom you will get to know very, very well.

If you can’t imagine firing employees, if you can’t imagine laying off people who do their jobs well, then you should never ever hire an employee.

Instead, use some of the tips in next week’s section on services, contractors, and other people you hire.

Here are some other tricky things about employees:  Lots of federal, state, and local rules and regulations govern your relationship with those employees.  Some of those rules govern how you pay them. Some govern the taxes.  Some govern how you treat the employee at the job.  Some govern what benefits you can legally give.  Some govern how you fire people.

All have an impact on you.  Employees can and do file grievances with the state for a variety of things, some valid (like sexual harassment) and some not.  Suddenly your business isn’t quite yours any more.

For example, I have a hell of a potty mouth, and whenever I’ve had employees, I’ve cleaned up my language so extremely that I could be talking to a nun without embarrassment.  Why?  Because some of the language I use can, in some states, be considered harassment, religious persecution, unfriendly workplace, all of that stuff.

Stuff you’ll have to consider, just because you hired someone else to sit in your place of business.

I’ve already alluded to the paperwork, which is enormous, even for one employee.  When I worked as an editor for Mercury Press, my boss complained about where I lived.  Mercury Press (which owned The Magazine of Fantasy and Science Fiction at that time) was based in Connecticut.  I lived in Eugene, Oregon, which was in Lane County.

And Lane County had some kind of tax on employees—a transit tax, if I remember correctly—that Mercury Press, in Connecticut, had to pay.  It wasn’t the money that bothered my boss.  It was the paperwork, which was nonstandard, and took hours every month to fill out.

The rest of what I’m going to say about employees you probably know, but you haven’t thought about from an employer’s point of view.  And you need to.

First, you must hire an employee.  Again, you must follow federal, state, and local guidelines to do this.  You cannot discriminate by race, creed, or gender.  And you cannot discriminate against anyone with disabilities.

Again, let me use a Mercury Press story.  Connecticut has some of the most stringent disability laws in the nation.  Because Mercury Press had three employees, it had to have ramps and bathrooms that accommodated the disabled.  Never mind that two of the three employees worked out of state.  My then-employer had to completely remodel his office building to comply with what were then new regulations.  It cost thousands.

You need to know what your state regulations are—and what the federal regulations are—before you ever hire anyone.  Especially if your store or office is old and lacks proper access.

If you work at home, realize that there are regulations governing businesses with employees in the home.  You also could be subject to a lot more harassment suits and other problems just because of your business’s location. 

(And think about this: do you really want to fire someone who then gets angry and knows where you live?  Just a thought from someone who once received a death threat from a volunteer she fired for cause.)

Let’s assume you go through a legal hiring process (yes, there are rules for hiring), and find someone you hope will be a good employee.

You need to know how many hours that person will work and how you will pay them.  Will you pay them hourly?  If so, you probably need some form of time clock.  The honor method really doesn’t work, unless you’re there to supervise.  If you pay them hourly, what will you pay for overtime?  (Realize again, that each state has rules governing overtime pay.)  

If there will be a lot of overtime, consider putting that employee on a salary.  Here’s the secret to salaried employees—the employer should get 50-60 hours of work out of 40 hours of pay.  Of course, the employee gets some perks as well—usually benefits like medical insurance, paid sick leave, paid vacation, a 401K—things that compensate for that unpaid overtime.  (Those of you who still have salaried positions, have you ever noticed that the first people laid off in any company are salaried employees who never put in more than 40 hours, and often put in less?  There’s a reason those folks get let go first—and it’s because they’re not giving a good benefit for the buck.)

This may sound silly, but I can’t tell you how many first time employers haven’t considered it:  Make sure the salary or hourly pay rate you offer is one that you can afford.

Before you set the rate of pay, make sure 1) that it meets the state minimum wage (which is often greater than federal minimum) and 2) that the pay rate is what you’re giving the employee, not what you’re paying out of pocket.

I heard a collective “huh?” from those of you who have never hired anyone.  Let me remind you of all that paperwork and taxes I discussed earlier.  Now go look at your last paycheck from your last (or current) job.  See the withholding?  See the Social Security tax?  See all those little notations, the dollars that never make it into your pocket?

When you’re the employer, those aren’t just numbers on a pay stub.  That’s money you have to pay. And you don’t just pay part of the Social Security.  You pay all of it (double what you see in your own pay stub). The withholding goes into a special tax account.  The Social Security payment does as well.

So when you promise to pay someone $10 per hour, make sure you can afford that money—including the tax payments on the hourly wage.  Or the salary.

The tax troubles you hear about—the scary ones, where you hear about the IRS bolting the door of a business—usually involve nonpayment of employee taxes.  Those are the easiest thing to skip in the short term, and the things that have the most consequences in the long term.

So make sure you can afford your employee before you ever accept a single resumé for the position.

Also remember that you’re obligated to pay this person.  Let’s say you agree on a two-week pay period.  You must write that check at the end of two weeks.  Your employee’s payment comes first—again, because of the laws governing this.  You can’t (or I should say shouldn’t) withhold payment because you can’t afford it or because some client didn’t make the payments he promised.  You must meet your employee obligations according to both state and federal employment laws.

So you better be able to afford that check every two weeks, like you promised.  The minute paying your employee looks dicey, you need to consider laying that employee off. 

Yep.  It’s tough.  And it gets tougher.

Because once you’ve hired that person and you’ve agreed to pay schedule, you also need to define the job that person will do.  Part of defining the job is scheduling work hours.

You have become a supervisor as well as a business owner.  You need to make sure your employee arrives on time, that the employee does the work assigned, and your employee leaves on time.  (The opposite of the employee who never shows up to work is the one who takes advantage of that hourly overtime rate to rack up a lot of extra money.)

You have to teach the employee to do the job properly—which in the short term will cost you some productivity (and that can be a problem, since you’re hiring this person to help your business become more productive)—and you’ll have to make sure the employee behaves properly (dresses appropriately, has good phone manners, has clean hands [in the case of restaurants], doesn’t cheat, lie, or steal…you name it, you have to watch for it).

You have just hired a person to save you time and here they are costing you time.  And they’ll continue to do so.  Employees are rarely self-motivating.  Most only do what they’re told.

So when you’re considering hiring an employee, you will need to factor in your lost time.  If that employee doesn’t bring in double or triple what they earn, they’re not worth the time and effort you’ll put into them.

I could go on and on.  I’ve been an employee and an employer.  I have a ton of horror stories—and none of them match the horror stories of my friend, a former manager who worked in high tech.  Having an employee is the most difficult part of owning a business.

So why would you want one? 

Oddly enough, most business owners see employees as saviors, as people who will take some of the burden off.

That can’t be farther from the truth.

But the very real fact of owning a successful business is that you can’t—and shouldn’t—do everything.  You will need help.

Fortunately, as I mentioned, there are a ton of services that can provide you with that help.  I’ll discuss them next time.

I keep meaning to write a section of the Guide on the importance of time to a freelancer, but I only think about that section when I get to this part of the weekly installment.  You see, writing the Guide takes time away from work that pays me up front.  I like the feedback the blog gives, the interaction with y’all.  But I do worry each and every time I finish a section that I’ve sold my services too cheaply.  I need to pay my bills, just like you do, and I do that by writing—and not by writing for free.  Hence the donation button.  Click it once and pay me for my time.  I appreciate it.

My mystery story, “E-Male,” has just appeared in Two of the Deadliest, edited by Elizabeth George. Lots of great writers in here. I’m ordering a reading copy so I don’t mar the one that goes on my shelf. If you want one, order here.

Didn’t post this in June due to computer malfunction.  So here’s May’s list, better late than never.  

Not a lot on this list since this month has been exceedingly busy.  I taught a workshop and read a mountain of book proposals (Note to editors out there:  Beware—good writing ahead lurks in your mail).  I’m moving my office, and I’ve had some emotional days such as losing my cat.  I’ve been reading a lot of YA, but none of it rises to a recommended level—it’s just comfort reading to get me through.  I’m also reading quite a few series novels, but none are better than the others in the series, so not really worth recommending.

Here are the things that stand out from one very long month.

May, 2009

Balogh, Mary, At Last Comes Love, Dell, 2009.  Even though this book is the third in the Huxtables series, romance series don’t run like sf series or even mystery series.  The romance series generally look at a group of people and how they find love.  The other characters make cameos in the book, but the book isn’t dependent upon any knowledge of any character.

I liked this book the best of the series so far, perhaps because it hits some of my favorite themes—people who are suddenly thrown into a circumstance and must cope or lose everything.  Of course, everything, in this case, is one innocent child, with a horrible horrible back story. 

I don’t dare say much more.  But I finished this book and saw that the pub date for the final in the series is nigh, so I ordered that book immediately.  And I know I’ll be reading it before the month is out.

Butler, Charles, “A Second Life,” Runner’s World, March, 2009.  Runner’s World is my favorite nonfiction magazine, bar none.  Most of the magazine is about discipline, inspiration, and performing at your best—all lessons that can be applied to writing as well as running. 

The profiles are beautifully written and fascinating. This one, about New York firefighter, Matt Long, is especially well done.  Biking to work one day, Long got crushed by a 20-ton bus.  His good physical condition allowed him to survive, even though he wasn’t sure he wanted to.  He went through dozens of surgeries, lost most everything, and still came out the other end.  This article goes through his saga from before the bus crash to his decision to run the entire New York marathon this year, despite debilitating injuries—any one of which would discourage most people from exercising altogether.

Excellent human interest story, but an even better profile in courage.  Worth reading.

Connelly, Michael, The Scarecrow, Little Brown, 2009.  Connelly brings back his hero from The Poet, the book that broke him out of the mystery genre.  I wasn’t that fond of The Poet, but I find I remember it more than a decade after I read it, which says something.  Connelly uses The Scarecrow to discuss the internet and the dying newspaper industry, and those parts of the book are the most alive.  The rest is a serial killer drama which is good and compelling, but not the best part of the book.  Lots of tension here, from the killer to the layoffs to the future of journalism.  I devoured the book in a few hours and wanted more—always a good thing.

Fitzgerald, F. Scott, “The Curious Case of Benjamin Button,” Tales of the Jazz Age, Scribners, 1922.  Kindle edition, 2008.  I thought I had read every single story F. Scott Fitzgerald had written. So when the movie, The Curious Case of Benjamin Button, was announced, imagine my surprise to learn it was based on an F. Scott Fitzgerald story, one I had never read.  I ran to my copy of The Collected Short Stories of F. Scott Fitzgerald only to discover the book’s real title was The Selected Short Stories of F. Scott Fitzgerald.  Good old Edmund “Bunny” Wilson, the famous critic, writer, and editor, had left all of Fitzgerald’s fantastic stories out of the volume except for the very famous “A Diamond as Big as the Ritz.”

I finally found a copy of “Benjamin Button”—actually, I found the entire book Tales of the Jazz Age, available for free download from Amazon and discovered it contained several stories I’d never read (damn that Bunny!).  I snapped up the story immediately, and read it, cringing as I began because I still trusted Old Bunny Wilson.  I figured it was one of Fitzgerald’s failures if it didn’t make the Selected volume.

It’s no Great Gatsby (but then, what is?) but “The Curious Case of Benjamin Button” is a very charming story with some wry twists, all of them unexpected.  I haven’t seen the movie yet (I really do like to read the source material first if I can, particularly if the source material is by one of my favorite writers), so I had some lovely surprises right from the start. 

This isn’t a story, per se, but a chronology of Benjamin Button’s unusual life.  The story has a poignancy it shouldn’t have for all its narrative tricks.  It’s actually sad that Benjamin Button doesn’t live a normal life.  And the ending with his growing so young that he no longer understands things echoes Alzheimers.

The story appears to be the precursor to one of my very favorite novellas, “Flowers for Algernon.”  (The shorter version is better than the novel.)  “Flowers for Algernon” is heartbreaking; “Benjamin Button” merely sad.  But they work off similar principles and make us look at life and living in a brand new way.  Find the story—I’m sure it’s readily available now in all kinds of forms—and read it.  It’s very well done.

Gopnik, Adam, “The Rookie,” Paris to the Moon, Random House, 2000.  Gopnik’s book, Paris to the Moon, is a collection of essays that he wrote mostly for The New Yorker while he was living in Paris with his wife and very young son.  Somehow, they work together seamlessly, and I was only going to discuss the book as a whole when I eventually finish it, but this essay jumped above the rest.

“The Rookie” is about Gopnik and his young son, who is an American growing up in Paris.  Only the boy moved to Paris while still in diapers, and doesn’t understand truly American things, like baseball.  So one night, Gopnik decides to change that.  He tells his son a bedtime story about the Rookie, a three-year-old phenom pitcher in 1908, who plays for the Giants.  The little Rookie faces down the greats of the era, including Ty Cobb (who nearly destroys the Rookie by calling him a baby—which upset Gopnik’s son), and helps win the World Series. (Gopnik figures he can dislodge the Cubs since his tale already has a 3-year-old pitcher.)

It’s a lovely essay, which turns out to be about much more than a bedtime story.  The essay covers what it feels like to be an ex-patriate, how different cultures evolve and what’s important to each, and how touchstones differ from person to person.  Tucked inside of all this are two things:  Gopnik’s relationship to his son and the magic of baseball, which the boy understands even though he has never seen a game.

This essay is so powerful, it’s worth a look, even if you don’t buy this excellent book.

Torres, Dara (with Elizabeth Weil), “Age is Just a Number,” More Magazine, April, 2009.  This is an excerpt from Torres’ upcoming autobiography. It’s quite inspiring, but it’s also illuminating. She clearly defines how much work it is to be a worldclass athelete, particularly one in her forties.  What I found particularly fascinating are her attitudes—how much perspective time gives us all.  Based on this excerpt, I will pick up the autobiography.

van de Wetering, Janwillem, “The Bleeding Chair,” Ellery Queen’s Mystery Magazine, March/April, 2009.  Okay, so I’m unsure about the proper reference format for the last name here, but that doesn’t really matter.  The story is wonderful.  Janwillem van de Wetterling was a Dutch born writer who wrote a great deal in English.  He died not too long ago, and this might be the last story he’ll publish.  Too bad.  He’s always been one of my favorite short story writers.

“The Bleeding Chair” accurately captures a small coastal village in the U.S.  He set this on the east coast, but as a person who lives in a small coastal village on the west coast, I can tell you that he mostly got this right.  Nicely atmospheric, with a great twist at the end and marvelous characters.  Worth looking up.

Artwork donated by Pati Nagle. 

The Freelancer’s Survival Guide:  Money, Part Seven

Kristine Kathryn Rusch

It’s nice to be back in my office in the middle of the afternoon, which this space is designed for.  The light is better and I’m not groggy, which always makes writing more fun.

Last week, I figured I could cover billing in a single section, but soon figured out I had much too much to say.  All of the money sections have gone like that.  Dealing with money is the most important part of fulltime freelancing, but it is the least glamorous.

And it tends to make my readers very quiet.  Thanks to those who commented last week, and the handful of people who talked to me about the Guide in person.  (That’s the benefit of a workshop.)  I also want to thank everyone who has donated through this tough money section.  I know the money posts aren’t inspiring—and inspiring stirs people to action—so I truly appreciate the folks who contributed during these weeks of finances.

This should be the last pure money post, although I still have several more financial topics to cover.  They can get their own heading—and if I’m feeling so inclined, I’ll cover a few things in between.

(Or maybe we’ll all eat our vegetables before we add a little dessert into the mix.  Dunno.  Tune in next week to find out.)

This week, I’m continuing the discussion of billing.  Two weeks ago, I promised a discussion of billing and toughness.  Last week, I started on the topic of billing with setting price.  I did mention toughness in passing, by saying that billing and toughness go together.

Then I established this tiny outline for this miniseries of sections: “In order to have income, you must charge for your work.  Once you set the price, you must demand payment in some form or another.  If you don’t get that payment, you must go after it, somehow.”

So many factors go into setting price that it took me more than 2000 words to skim the surface of that topic.  If you haven’t read last week’s, check out Money, Part Six  before you read any further in this section.

Let’s assume you’ve established price for your various wares/services.  You know what you’ll charge.  You’ve even been a good freelancer and agreed upon price with your client before you take the job.

Now the difficult part begins.

Not the actual work.  Freelancers love the actual work; that’s why we’re in this crazy business. 

The hard part is making sure we get paid.

Early on, most freelancers are reluctant to discuss payment.  Most believe that setting price, signing a contract, or settling on a bid, is more than enough.  Unfortunately, it often isn’t.

In the area of payment, the only self-employed person who has an advantage is the storeowner.  The moment a customer enters a store, she knows that she has to lay down some cash if she wants to remove an item from that store.  The item usually has a price sticker, or sits on a shelf beneath a properly displayed price.

The only people who walk out with an item they haven’t paid for are shoplifters, who can be prosecuted under various and sundry criminal statutes, depending the price of the item or items they steal.

If only the rest of us had it so easy.

Here’s a fact:  People hate to pay bills.  I know I do.  Just today when I was in the post office, a woman joked about not paying her bills next month because she was tired of their constant demands.

When you agree to perform a service or do a job, and you have not received full payment from your client up front, your work has become a bill.

Now think of this bill from the client’s point of view, because you are a client of various services and a purchaser of many wares.  Your monthly bills are paid on a schedule (on time, I hope).  They’re also paid according to importance.  In fact, we’ve already discussed this several times, all from the freelancer’s point of view, in When to Give Up Your Day Job, Money Part 2, and especially in Money Part 3.

Your bills get paid in a certain order.  So do everyone else’s.  Including your clients.

And unless you’re providing an important continuing service, you will automatically rank lower than the rent, the utilities, and the groceries.  The good clients pay you no matter what.  The well-intentioned clients pay you when they can.  The bad clients pay you when they get around to it.  The horrible clients don’t pay you at all.

You will get all four clients in your business.  The key is to make sure the bulk of your clients are good clients.  Realize, however, that good clients can become horrible clients if something awful (like a recession) happens.  I’ll talk about the warning signs of that impending catastrophe a little later.

When they start, most freelancers assume all of their clients will be good clients.  Many freelancers rely on the contract they have with the client to set payment times.  Most contracts—and all jobs requiring a bid—have dates certain for payment.  If that payment isn’t met on that date, then the contract is void.

(Conversely, the freelancer also has dates by which the service or job must be finished.  If the freelancer misses those dates, then the contract is void as well.)

The good clients mark those dates on the calendar, and meet them without any prompting at all.  Provided you do the work as agreed (and of course you do), checks show up in your mailbox like clockwork.

In all of my years in publishing, only a few of my clients have paid on time.  Even though publishing contracts have a date certain for payment (usually triggered by turn-in dates for my side of the work), most major publishers pay three to six months after they’re legally obligated to do so.

It took me a long time to figure out why.

Like any corporation, large publishing companies have different departments to handle different tasks.  When I turn in a manuscript, the editor immediately puts in for payment.   But that request for payment goes through several hands before a check ever gets cut.  Then that check must find its way to me.

These systems benefit the corporation.  The longer it hangs onto its money, the more interest it can earn from that money.  (This practice used to be even worse in the 1980s, when personal savings accounts paid 5% on deposits—and businesses earned even more.)

Some of these delays are the cost of doing business.  You have to expect them.  And, if you do a lot of business with a certain client, you learn how long their in-house process is.  Sometimes you can expedite that process.  But rarely can you avoid it altogether.

That’s why so many bills that you received have a net 30 days payment request on them.  That’s a tacit acknowledgement of the fact that you won’t pay the bill the day it arrives.  You must pay it within thirty days.  That’s considered reasonable within the business world.  You’ll learn what reasonable is in your freelance world within a short period of time.

However much we wish otherwise, good clients are rare in all businesses.  The most common client is the well-intentioned client.  These people pay their deposit and then might not pay another dime for months, maybe a year, although they mean to.

How do you get a well-intentioned client to pay?

There are several ways.

First, you invoice.  Most freelancers never invoice.  Many writers haven’t written an invoice ever, yet they bitch when they don’t get paid.  An invoice, sent monthly, is an excellent reminder of payment due. 

That invoice should be net 30 days like most invoices.  It should also carry a notice:  Any payment made after 30 days will receive a 1 percent surcharge. (Or a late fee of no more than 10% of the bill, which you should delineate out.  If the bill is for $250, then the late fee should be no more than $25 and can be as little as $2.50.)

This is an easy way to notify the client that you will charge more if payment is late.

Often that’s enough to get the well-intentioned client to pay within thirty days.

Second, make a courtesy call.  Yep, call someone about the payment and ask for it.  Calling a client about a late bill is uncomfortable for you, but even more uncomfortable for him.  He’s well intentioned, remember, and will be embarrassed by his own behavior. 

If you’ve invoiced the client, remind him that he had to pay within thirty days.  Call within the week of the missed payment and say that you’ll waive the late fee if the check arrives immediately.

Chances are, you’ll get money within the week.

Usually, those two things are enough to get a well-intentioned client to pay.  Remember that the timeline varies from profession to profession.  Unfortunately, in my profession, net 90 days is customary.  So I initiate a version of this system after three months, instead of after just one.

The timeline also varies from job to job.  If you’re a contractor who must finish a house a month before the annual beginning of the rainy season, then you might invoice every week or two.  If the client gets behind…

Well, let’s discuss clients who pay very late in a moment.

Just remember:  the best thing to do is believe that all of your clients are well intentioned.  If you believe they’re all good clients, you’ll get burned a lot early on.  If you believe they’re all well intentioned, you’ll invoice and you’ll keep an eye on payments.

Invoices, by the way, can be generated for all types of businesses.  All it really takes is a piece of paper with the name and address of your business, the date, the date of service or job turn-in, the amount, a running total (in case the client doesn’t pay the previous invoice), a 30-60-90 day clock, and a notice of possible interest or late fees if the client is delayed in payment.  Most accounting software has an invoice that you can tailor to your business. 

Print out two copies of the invoice and save one paper copy for your files.  If you have a computer crash like I did a few weeks ago, you’ll be happy that you did.  (Not everyone backs up their data on a daily basis, so you’d miss some invoices.)

Set up a business calendar with client payment dates marked in red.  I mark the date the payment is due, the date I expect the payment (which is often different—by the aforementioned 90 days), and the date when I will consider the payment overdue.  My computer calendar has reminders, so I will get notification, which does spur me to action.

That’s a simple system, and one that works for a freelancer who works alone.  I’m sure there are as many systems as there are freelancers.  The best thing to do is have a system in place that works for you.

Well-intentioned clients can become good clients with some diligence on your part.  The well-intentioned client who doesn’t have financial troubles will get into the habit of paying you regularly because you’re one of those people who nags about money.

The sad truth of the matter is that the old cliché is right: the squeaky wheel does get the grease.  And if the client knows you’ll want payment on time (or at least within 30 days of invoice) or you’ll constantly remind them, they’ll make sure the reminders never happen.

But a financial reversal can change any client—good or well intentioned—into a bad client.  Here’s where the freelancer gets in trouble.

Again, put yourself in the client’s shoes.  His income gets reduced due to the bad economy.  He pays the essential bills—rent, power, water—and puts everything else on a sliding scale.  That scale is determined by need, but also by what Mark Terry called in the comments section of the last post, the PITA tax.

I love that term.  It’s the Pain In The Ass tax.  If the client knows you’re going to bother him when you don’t get paid, you’ll move up the payment ladder. You’re a potential pain in the ass.  And in billing, pains in the ass get paid.

Unfortunately, it’s the silent, polite freelancer who loses out here.

If you assume your good client will continue to pay you on time, you’re very trusting.  Someday you will pay for that trust.  As I once told a freelancer friend of mine, the secret to getting paid is to be first in line, especially as money troubles hit.  I’ve been paid by more failing businesses than most of my writer friends.  I’m familiar with the signs since I’ve had businesses that fail.  And when the signs become obvious, I’ll push harder and harder for payment.

We’ve all been in the client’s circumstance.  We all know that some bills slide, and then slide some more, and sometimes they never ever get paid.  The quieter the freelancer is, the more likely the money will run out and the freelancer will never get paid.

The bad client promises payment, yet never comes through.  Ninety days pass, then 100 days pass, and still no payment, not even if you send invoices with late fees and make the follow-up phone calls.

So…how do you get paid?

You stop working.  It’s that simple.  To use the contractor example from above.  Let’s assume the contractor must frame in a house before the rainy season.  The client hasn’t paid the incremental fees on the contract.  (For example, ten percent when the foundation gets dug, plus expenses [I’m making these percentages up; I know they’re not accurate]; another ten percent when the foundation gets poured, plus expenses, and so on.)

The contractor tells the bad client that the house won’t get framed in until all invoices are paid. The client might lose the entire house to wet, mold, and other problems if the contractor stops. 

I haven’t dealt with one thing that needs a mention here.  Any agreement you have with a client needs consequences—on both sides.  Never assume that the client understands your work methods.  Have it all in writing up front.

I’m not a lawyer, so I’m not going to deal with contracts or bids or binding agreements at all in the Guide.  But remember this:  It’s better to have everything in writing—clear writing—than it is to have a spoken gentleman’s agreement.

Recently, I have had to withhold manuscripts from publishers while I awaited payment.  I’ve had to do this before in recessions or economic downturns.  In one recent case, the contract was invalid until I got my first payment.  In other words, the publisher and I had no agreement at all until money changed hands.  I didn’t turn in the completed manuscript until I got paid because the contract wasn’t valid until the client paid me up front.

Other writers with the same house had no trouble turning in their manuscripts.  But I’ve had work published without payment only to then watch the publishing house collapse.  The work is published, those publication rights exercised (which means I lost those particular rights), and I never received compensation.

So I’m tough about being paid.  Even with friends.

In another instance, a reputable small company bought a story of mine and gave me a contract that guaranteed payment on acceptance.  I didn’t receive any money.  I nagged and invoiced. Months later, I saw a prepublication galley of the book with my story in it.  I called the people in charge, reminded them that they had no rights to the story because they hadn’t paid me, and they told me they weren’t going to pay until after publication.

That was not in our contract.  They wouldn’t budge.  Neither would I.  (Ten other writers gave in, feeling sorry for the publisher.) The contract was void.  They had lost the right to publish the story. I pulled the story from the anthology a month before the anthology was due to appear.  The company had to reprint the text, junking a lot of paper.  It would have been cheaper to pay me. 

But, last I heard, no one in the anthology has been paid (two years after the publication) and the company never paid the printer either.  The handwriting was on the wall.  That company is officially on hiatus (unofficially out of business).  Even if it comes back, it will never regain its good reputation.

I sold that story to a different market, making triple what the first publisher had promised.  And I got paid on acceptance.

I made money in that transaction.  I’m the only freelancer who did.

Because I’m tough.

I expect my business to be treated like any other business.  I expect payment for my work.  I expect that payment on time.  I will modify my on-time expectation to include what is reasonable for the client’s usual payment schedule.  But…I will charge late fees.  I will nag if I’m not paid.  And I will withhold work or withdraw work if no payment is forthcoming.

Often I do the tough jobs myself.  In later sections, I will discuss employees who make the tough phone calls or write the difficult letters.  But in any one-(wo)man operation, the proprietor writes the dunning letter and makes the dunning phone calls.  And pulls the plug on projects until the money arrives from the client.

Sometimes the money never arrives.  That turns the bad client into the horrible client.  The key here is to make certain that the horrible client doesn’t owe you too much money, which is why you get tough with the bad client.  You’re cutting your losses early. 

You have to assume that all bad clients will become horrible clients.   You must make sure that whatever money the bad client refuses to pay now is the only money they owe you.  Because you could go ten, twenty or one hundred percent deeper in debt.  I’ve known freelancers who have done three or four jobs for once-good clients before the freelancers realized the client hadn’t just become bad, he’d become horrible.

That’s how you go out of business—you’re not getting paid.  You’re doing someone with a failing business a favor. And the best thing you can do for someone whose business is failing is pull out of the slide.  Maybe that will be wake-up call the client needs.  Maybe then that client will take drastic action and pull his business out of the slide.  Or go out of business before he drags others down with him.

Once you become convinced that the horrible client will never pay his bills with you, you have a choice.

You can continue to pursue the debt, which may mean that you’ll have to hire a lawyer, go to court, and maybe get in line at a bankruptcy proceeding, as an unsecured creditor.

Or you can write the debt off.

I try to never get into this situation.  But in the few times things have gone this badly for me, I’ve declined to go to court.  Why?  By the time I have to hire a lawyer, the chances of me getting any money from the client are slim.  If the client is in bankruptcy, I am a minor unsecured creditor.  The secured creditors get paid first.  The unsecured may get a share of what’s left or nothing at all.

By this point, I will have wasted years and gallons of stomach acid on something that will give me no financial return at all.  Better to chalk it all up to experience and move to the next project.

Again, I’m not an attorney, nor am I a tax accountant.  But I do write off losses in the year that loss occurs.  And sometimes I make more money on the write off than I ever would if I had to pay a lawyer, go to court, and squeeze some pennies out of the deadbeat client.

Be practical and remember what your time is worth.  You’re always better off doing new work than you are chasing after deadbeats (no matter how furious they’ve made you).

How do you know a good client is going bad?

First, pay attention to the world around you.  As the economy slipped into recession, the business sections of newspapers told the story.  It’s been clear for years now that the housing bubble would burst.  It’s also been clear that American car manufacturers were in trouble.  When the credit crisis hit, all businesses that couldn’t exist without a business line of credit would struggle to stay alive.

If you had any of those businesses as clients—or if you had clients in related fields—you should have been making certain you got paid up front.  You also should have been limiting the amount of work you did in those markets, maybe cutting them altogether and finding new clients.  (Remember how I recommended diversification? This is why.)

I follow the news religiously.  It keeps me on top of my game.

But that’s a global way of staying on top of things.  Even when the national economy is rosy, people still go out of business. They mismanage their accounts.  They overextend. They produce a crummy product or take too many vacations.

Payments will get slower and slower. They might even become late for the first time in your relationship.  When you call to check on something, the client will ask you for a favor.  Can you do something now for payment later?

In these circumstances, the answer is—and should always be—no.

You have your own business to run, your own bills to pay, and your own family to feed.  You must keep clients on a businesslike relationship.  That’s why so many people recommend that you never go into business with your friends.  Because friends are the hardest people in the world to say no to.

Chances are that you will lose the client’s business, maybe forever. But if things have gotten so bad that the client can’t pay you for work already completed, then he’s probably going out of business anyway.  Maybe not this year.  But next year.  And you don’t want him to take you with him.

However—and this is a big however—know what is customary in your business.  A friend who has no connection to the publishing industry told me this story:  One of her friends self-published a nonfiction book and somehow managed to get the local chain bookstore to sell it. The book sold out.  The self-published writer demanded payment from the bookstore immediately.

All bookstores pay on net 90 days—sometimes on net 120 days.  Chains never pay before that 90-day window. 

This self-published writer wanted the money immediately. When she still hadn’t seen a check after thirty days, she sued.

She lost, of course.

My friend talked about the injustice of the big chain bookstores, when in reality, her self-published friend knew nothing about the business and acted inappropriately.  The self-published writer cost herself a lot of grief and money when she could have simply learned a bit about the business and gotten her small check.

So…before you decide that someone is a horrible client, make sure you know the norms of the business you’re in.  Check your contract/bid/ binding agreement.  You might have signed something that allowed a later-than-usual payment.

Before you blame the client, make sure the mistake is not your mistake.

And remember, sometimes that mistake is being too lenient from the beginning.

I’ve learned to be tough with money.  I’ve had clients go bankrupt.  I’ve had friends take advantage of my generous nature.  I’ve had good clients turn horrible.

I’ve also trained well-intentioned clients to be good clients.  I’ve waited for payment from companies that have had odd downturns (9/11 was an obvious and serious one).  I’ve been a freelancer for most of my adult life, and I’ve always made a living.

Then again, at any sign of trouble, I’m always the first in line.

And yet, here I am, asking for donations to help me continue this Guide instead of demanding payment by making the Guide inaccessible to anyone who hasn’t paid.  The donation aspect of my Freelancer’s Guide is still an experiment. Some weeks it works (thank you!) and some weeks, I wonder if I should have chosen this model for the Guide.  I do appreciate all the comments, and the recommendations as well as the donations.  Please contribute if you can—and by all means, pass the URL to others who might be interested in the topic. Thanks.

My story, “Defect,” has just appeared in The New Space Opera 2.  Lots of good writers in this book.  (I can hardly wait to read my copy.)  You can buy one here.