Freelancers' Questions: Should a freelancer I hire invoice me or my client?

Freelancer’s Question: I’m just starting out as a freelance marketer and have a potential client looking for some support that will require a designer. I have a couple of freelance designers I could work with, but how would I go about invoicing the client? I have told the client that I would be working with another freelancer for any design work.

Would I invoice personally for everything and get the designer to invoice me, but then risk having to pay him if I'm not paid by the client?! Or would I ask him to do an invoice for his work separately to the client, which I would pass on?

Expert’s Answer: When it comes to invoicing, the general rule is that a supplier can only invoice a customer that they have a contractual relationship with. This can be a difficult balancing act in the situation you describe when more than two parties are involved.

As you correctly identify, if your freelance business engages the freelancer to do the design work and subsequently invoice your business, then it is your business that is liable for the payment, as your business holds the contractual relationship with the designer.

If, for whatever reason, the client does not pay you, then your business would be losing out twice -- once for the unpaid work you have done and again when you have to pay the designer.

You could theoretically include a ‘pay when paid’ clause that states the designer will only be paid on receipt of funds from the end-client, but we would not recommend this. These clauses pass the risk of non-payment on to the supplier but do not give them the chance to conduct any ‘due diligence’ to identify the credit risk. They are in our view, toxic to a well-managed credit control process.

Alternatively, you could introduce the designer directly to your client and they can form their own contractual relationship, removing any obligation on your part towards the designer for payment. However, this would have to be accepted by the client -- some will only want to deal with one supplier.

The solution we would recommend would be to secure a deposit from the client that covers the fees for the design work as an absolute minimum. This would allow you to present a unified brand to the client as they would only be receiving invoices from you. For you, it would also negate the risk of a double-loss if the client ends up not paying.

Plus, if you are in a position to pay in advance for the design services then you may be able to negotiate a discount and further increase your profit margin. If not, then at the very least you should garner some goodwill with your designer. This may come in handy later down the line!

The expert was Adam Home of debt recovery specialists Safe Collections.

 

1st June 2017

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