What happens to small creative agencies when clients don’t pay on time and how to avoid or handle such delays.

Camilla Papale
4 min readJun 17, 2021
Image by: Sara Fox

As the owner of a boutique brand studio, I genuinely treat my clients’ businesses as if they were my own. My team and I always go above and beyond the scope to ensure that our projects succeed. But what happens when these clients take their time to pay you? It is the problem I had to grapple with for as long as I owned my business over the last decade. It is definitely something that keeps me up at night. Compared to large agencies with substantial portfolios of clients, small studios like mine suffer immensely from such delays. Below are the ways clients hurt the business by taking their time in processing invoices:

  1. Lack of cash flow to meet contractor payments. Many of my contractors are women who support their families. Morally, I cannot make their payments contingent on clients paying me. And, since I tend to pay contractors right away, this leaves me with the inability to meet payroll and tax obligations which can send the business into a financial tailspin.
  2. Being forced to rely on loans to float the business. This is tricky. Unless you want to dip into your savings to cover your business expenses, loans are pretty much the only option that is left. And, these don’t come free. On top of the interest, you have to worry about meeting weekly payments when, again, the clients delay compensating you. Unless you increase your rates to budget for this contingency, you are losing money. Also, please be aware of predatory business loan practices. Opt for reputable names.
  3. Loss of confidence and passion for the project. In business, time is money. And, being respectful of someone’s time is the foundation of a productive and cordial business relationship. By not fulfilling their payment obligations when the work has been delivered, the client is signaling that your time is not valuable to them. And, that can affect all the goodwill that was built over the life of the project. While bad experiences can be forgotten, the euphoric feeling of creative excitement about the project can be lost in the process.
  4. Stress and loss of productive time. Extraordinary stress levels associated with the above can inhibit your ability to create while dealing with the humiliation of constant follow-ups and frequently being passed around through the food chain of accounting. These issues can take hours of productivity you will never gain back.

How to mitigate stresses associated with late payments so your small business can thrive while you maintain peace of mind and your business cashflow:

  1. Charge upfront. Outline a very detailed payment schedule and clear terms around compensation in your contract. If your relationship with the client is not retainer-based, collect a 50% deposit for the entire scope upfront. For long-term projects, opt for a progress payment upon completion of specific milestones. Such ratio could be 50% deposit, the second payment upon 75% completion of the scope, and the final payment. Such a scenario increases the perceived value of your services and provides you with the cash flow in the case if the project is delayed. Do not commence the services until the deposit is received. This is really hard. In my world, clients want to start work right away and have very aggressive timelines. Try to stick to the contract no matter what. It is business afterall, and you are absolutely entitled to be paid. I made this mistake many times.
  2. Retainer-based projects. Try to stick to monthly pre-payment for services but it is important to bill on time. If payments are delayed, do reserve the right to pause service delivery in a gracious and empathetic fashion.
  3. Getting the final payment. The final payment is always the hardest to receive on time if you have already handed over all the work. In my payment schedule, I typically specify that the final assets will be delivered upon prompt payment but it is hard to achieve if the project includes multiple deliverables with moving timelines. In any event, try to withhold at least one deliverable as an incentive to produce the final payment in a prompt fashion.
  4. Include a 10% surcharge on payments that overdue for over 30 days. This should be in your contract. For me, it’s very hard to speak about money with my clients. But in order to avoid dissillusionment down the line, be upfront with a client prior to engagement about your payment policy and lack of tolerance for late payments.
  5. What to do when the client doesn’t pay at all? Always plan for this contingency. Although it only happened to me twice during the lifespan of my business, this one really hurts especially if you delivered the work. As a small business, I do not have the resources to pursue the legal route and, in both of these instances, I had to deal with my fair share of frustration and stress due to loss of time and income. One of the ways to mitigate this would be to do due diligence about the client upfront. The industry I operate in is fairly tightly knit and a few phone calls can shed the light on their reputation and accounting practices. If they have a history of late or skipped payments, collect your fees upfront.
  6. Finally, try not to let this get to you. For many, the stress associated with running your business is far greater than working for someone. Alas, it’s one of the challenges of being an entrepreneur. By creating clear legal protections, having the wherewithal to stick to your terms no matter the circumstances, and practicing self-care are true and tried ways to stay sane, productive, and content.

I welcome feedback and actionable suggestions to support the community of small creative businesses out there.

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Camilla Papale

Founder + Creative Director of Madison Avenue Creative. Luxury Woman to Watch Luxury Daily. #CMO