Freelancing is one of the hardest jobs out there. You’re entirely on your own. You have to be your own lawyer and create online contract templates, accountant, and admin, in addition to actually working for clients and making sure they pay all your invoice templates!
It seems obvious that you should get paid for the work you do. Unfortunately that’s not always the case for freelancers. In addition to irregular income streams and projects, freelancers have to deal with clients that don’t pay on time. This makes an already hard job even harder.
Freelancers assume late payments are a professional hazard, but just how common are they, and what factors influence whether a freelancer is paid on time?
Bonsai, which provides business management and automation tools to 100,000+ freelancers, analyzed 3 years of freelance invoicing data to find out. The invoices covered all types of work, from digital design and development to photography and marketing. That data includes demographic info on the freelancers themselves, as well as info on their projects and payments. We've also made a guide on how to make an invoice.
Some of the findings weren’t surprising: 29% of invoices were paid at least a day late. Other data points were shocking: female freelancers were paid late 31% of the time, versus 24% of the time for male freelancers. We also learned that cryptocurrencies are terrible payment methods for freelancers, resulting in almost 3x more late payments than other payment options like bank transfers.
We started by looking at how likely a freelancer’s invoice is to be paid late. We counted an invoice as paid late as one that one paid even one day past the due date. Most freelancers give clients 2 to 4 weeks to pay an invoice once it’s sent.
We found that 29% of invoices were paid after they were due. Over 75% late invoices were paid within 14 days of the due date, and 90% were paid within a month. However, even these delays could significantly hamper a freelancer’s ability to pay for necessities like rent and groceries.
Clients pay late for many reasons. They can simply be busy, which affects all companies, from the bureaucratic slowness of large organizations to the hectic disorganization of small ones. Clients can also be bullies, who see freelancers as powerless to enforce on time payment. Freelancers can also be to blame if they don’t set and stick to a clear payment schedule.
However, certain factors influence late payments regardless of the freelancer’s abilities or client’s size.
The most unfortunate of those is the gender of the freelancer. 31% of female freelancers’ invoices were paid late, while 24% and 23% of men and studios’ invoices were paid late.
This effect persisted even when we controlled for the freelancer’s skill set or experience and client’s size.
How a client pays a freelancer also significantly influences whether that invoice was paid on time. Payment via cryptocurrencies were late almost 3 times more often than those with ACH or bank transfer.
These late payment rates were the same even when we accounted for the slower processing time of ACH / bank transfer (up to 7-10 business days) versus the relatively quick transfer times of bitcoin. Unsurprisingly, cash and check are also a slow payment method, given the friction needed for the client to withdraw cash or physically write and deliver a check. Common digital payment methods, such as credit and debit card via Stripe or Paypal represented the average.
Another interesting finding is how the type of work a freelancer does influences their likelihood of being paid late. While many would expect higher earning freelancers like software developers and designers to be paid on time, they were paid late 29% and 28% of the time, while more “old school” freelancers like writers and photographers enjoyed relatively fewer late payments (26% and 24% respectively).
There are several hypotheses for why freelancers or certain skills are paid on time more than others. It can do with the fact that writers and photographers have a more defined work product to turn over (a blog post or an essay), and can use that as leverage in payment. Designers and developers have also relatively higher earning than writers and photographers, so it can also be that they have more of a cash buffer and are more willing to let late payments slide.
Check our study on freelance rates to see how rates differ across skills, experience and locations.
Lastly, the size of the invoice has a very clear and linear effect on its late payment rate. The larger the invoice, the more likely it was to get paid late. The largest invoices of over $20,000 were 3 times more likely to be paid late than an invoice of under $100.
This likely has to do with the steps and authorization necessary for clients to pay larger amounts. Interestingly, we found little relationship between payment size and payment method. Some clients will happily pay a $15,000 invoice with a credit card, while other prefer a bank transfer for even $150 invoices.
Freelancing can be a rewarding career: you get the flexibility to set you own path and control your destiny. However, these benefits come with risks, especially getting paid late. You can do things like avoid payment via cryptocurrencies or invoicing for large amounts at once, which make you 3 times more likely to get paid late than other payment methods or small invoices.
However, some things, such as your type of work or even your gender, can be harder to change but just as impactful on your payment prospects. Unfortunately for freelancers, it’s not just the work you do, but how you charge and who you are, that determines whether you get paid on time. Sign up for a free Bonsai trial and get paid faster.
A verbal contract (formally called an oral contract) refers to an agreement between two parties that's made —you guessed it— verbally.
Formal contracts, like those between an employee and an employer, are typically written down. However, some professional transactions take place based on verbally agreed terms.
Freelancers are a good example of this. Often, freelancers will take on projects having agreed on the terms and payment via the phone, or an email. Unfortunately, sometimes clients don't pull through on their agreements, and hardworking freelancers can find themselves out of pocket and wondering whether a legal battle is worth all the hassle.
The main differences between written and oral contracts are that the former is signed and documented, whereas the latter is solely attributed to verbal communication.
Verbal contracts are a bit of a gray area for most people unfamiliar with contract law —which is most of us, right?— due to the fact that there's no physical evidence to support the claims made by the implemented parties.
For any contract (written or verbal) to be binding, there are four major elements which need to be in place. The crucial elements of a contract are as follows:
Therefore, an oral agreement has legal validity if all of these elements are present. However, verbal contracts can be difficult to enforce in a court of law. In the next section, we take a look at how oral agreements hold up in court.
Most business professionals are wary of entering into contracts orally because they can difficult to enforce in the face of the law.
If an oral contract is brought in front of a court of law, there is increased risk of one party (or both!) lying about the initial terms of the agreement. This is problematic for the court, as there's no unbiased way to conclude the case; often, this will result in the case being disregarded. Moreover, it can be difficult to outline contract defects if it's not in writing.
That being said, there are plenty of situations where enforceable contracts do not need to be written or spoken, they're simply implied. For instance, when you buy milk from a store, you give something in exchange for something else and enter into an implied contract, in this case - money is exchanged for goods.
There are some types of contracts which must be in writing.
The Statute of Frauds is a legal statute which states that certain kinds of contracts must be executed in writing and signed by the parties involved. The Statute of Frauds has been adopted in almost all U.S states, and requires a written contract for the following purposes:
Typically, a court of law won't enforce an oral agreement in any of these circumstances under the statute. Instead, a written document is required to make the contract enforceable.
Contract law is generally doesn't favor contracts agreed upon verbally. A verbal agreement is difficult to prove, and can be used by those intent on committing fraud. For that reason, it's always best to put any agreements in writing and ensure all parties have fully understood and consented to signing.
Verbal agreements can be proven with actions in the absence of physical documentation. Any oral promise to provide the sale of goods or perform a service that you agreed to counts as a valid contract. So, when facing a court of law, what evidence can you provide to enforce a verbal agreement?
Unfortunately, without solid proof, it may be difficult to convince a court of the legality of an oral contract. Without witnesses to testify to the oral agreement taking place or other forms of evidence, oral contracts won't stand up in court. Instead, it becomes a matter of "he-said-she-said" - which legal professionals definitely don't have time for!
If you were to enter into a verbal contract, it's recommended to follow up with an email or a letter confirming the offer, the terms of the agreement , and payment conditions. The more you can document the elements of a contract, the better your chances of legally enforcing a oral contract.
Another option is to make a recording of the conversation where the agreement is verbalized. This can be used to support your claims in the absence of a written agreement. However, it's always best to gain the permission of the other involved parties before hitting record.
Fundamentally, most verbal agreements are legally valid as long as they meet all the requirements for a contract. However, if you were to go to court over one party not fulfilling the terms of the contract, proving that the interaction took place can be extremely taxing.
So, ultimately, the question is: written or verbal agreements?
Any good lawyer, contract law firm, or legal professional would advise you to make sure you formalize any professional agreement with a written agreement. Written contracts provide a secure testament to the conditions that were agreed and signed by the two parties involved. If it comes to it, a physical contract is much easier to eviden in legal circumstances.
Freelancers, in particular, should be aware of the extra security that digital contracts may provide. Many people choose to stick to executing contracts verbally because they're not sure how to write a contract, or they think writing out the contract terms is too complicated or requires expensive legal advice. However, this is no longer the case.
Today, we have a world of resources available at our fingertips. The internet is a treasure trove of invaluable information, platforms, and software that simplifies our lives. Creating, signing, and sending contracts has never been easier. What's more, you don't have to rely on a hiring a lawyer to explain all that legal jargon anymore.
There are plenty of tools available online for freelancers to use for guidance when drafting digital contracts. Tools like Bonsai provide a range of customizable, vetted contract templates for all kinds of freelance professionals. No matter what industry you're operating in, Bonsai has a professional template to offer.
A written contract makes the agreement much easier to prove the terms of the agreement in case something were to go awry. The two parties involved can rest assured that they're legal rights are protected, and the terms of the contract are sufficiently documented. Plus, it provides both parties with peace of mind to focus on the tasks at hand.
Bonsai's product suite for freelancers allows users to make contracts from scratch, or using professional templates, and sign them using an online signature maker.
With Bonsai, you can streamline and automate all of the boring back-office tasks that come with being a freelancer. From creating proposals that clients can't say no to, to sealing the deal with a professional contract - Bonsai will revolutionize the way you do business as a freelancer.
Why not secure your business today and sign up for a free trial?