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Clauses Regarding Payment6:21 with Pasan Premaratne
The most common problem freelancers have is getting paid on time. There are many things you can do to mitigate this issue and the first step is including the relevant clauses in your contract. Let’s go over some of the common clauses we can include to avoid nasty payment problems.
Every section is a contract is important, but one of the most important is provisions covering payment. 0:00 Why do all this work if you can't get paid, right? 0:06 When freelancers submit project proposals, they often submit a quote along with it, as well. 0:09 Quotes serve an important purpose by detailing the costs of undertaking a project, 0:14 and a client's signature on it signifies that they agree to the price you are charging. 0:18 But that isn't a guarantee of payment and in your contract, 0:23 you can include provisions that protect you against different forms of sketchy payment tactics by your client. 0:26 Traditionally, most quotes only include pricing information, and with good reason. 0:33 You don't want to scare off your client with legal stuff on top of your prices, 0:37 but you should always include these provisions in your contract and make sure the client signs off on it. 0:41 Let's go over our main sections—fees and estimates. 0:46 Now, we covered this earlier when we talked about the project proposal, but let's go over it again. 0:50 This is the main purpose of the quote—to indicate how much you are charging for the project and how you arrived at this estimate. 0:55 If you're charging hourly, indicate the rate and the time you estimate per activity, as listed in the project proposal. 1:01 If for any reason, depending on your locality, you're going to be collecting taxes, indicate that, as well. 1:08 You may also want to state a time limit that these prices are valid in case the client holds you to it for future work. 1:15 Payment schedule—how will you be paid? 1:21 The biggest mistake you can make is to take a one-time payment on the completion of the project. 1:24 Break up the total payment into smaller scheduled payments across the life of the project. 1:29 Take a percentage up front when you've agreed to work on the project 1:34 and then schedule payments at the end of every phase or milestone, 1:38 or you can take 50% on signing of the contract and the rest on completion of the project. 1:41 Don't hand over any deliverables until you have received payment for it. 1:47 With small clients, that breakdown is probably overkill. 1:51 You could take a smaller percentage up front and then the rest on completion. 1:55 Only accept payment on completion from clients you really trust and have a very longstanding relationship with. 1:59 Make sure these terms of payment are pretty clear 2:06 and indicate the consequences of not paying you accordingly. 2:09 Some freelancers will communicate that work will not commence 2:12 until both the signed contract and the initial payment are received, 2:15 and that the site will not be launched until final payment has been delivered. 2:18 Others put the site up, but after a certain grace period, pull it down if no payment is received. 2:22 Then, there is payment terms. Explain your terms properly and cover your bases. 2:29 In the book, Pricing and Ethical Guidelines, the guys of the Graphic Artists Guild 2:34 point out that there is a big difference between payment 2:38 being required a certain number of days after the receipt of an invoice 2:41 and a certain number of days after the first use. 2:45 The latter can be delayed for many reasons outside the freelancer's control 2:48 and it may be quite a while before you get paid. 2:52 Mention how the client should pay you, as well— 2:55 whether by check, a bank transfer, online, or any other means—and who the payment should be addressed to. 2:58 These terms will cover your basic payment rights, 3:05 but there are still situations where the client can mess you up. 3:08 Let's see what could possibly happen and how we can protect ourselves. 3:11 In our first scenario, we have a lack of communication or if the client abandons the project. 3:15 Sometimes, clients can hire you, seem enthusiastic, pay your upfront costs, and then just disappear. 3:20 They're impossible to get in touch with, take forever to answer your emails, 3:27 and are absolutely no help in moving the project forward. 3:30 Time is money, and this is definitely time lost, so you need to cover your bases. 3:34 You can include an abandonment of project clause, 3:39 denoting that if the client fails to communicate within a certain number of days, 3:41 then the project is essentially deemed abandoned 3:46 and you have the right to bill your client for any services rendered thus far. 3:48 In our second scenario, the client is asking for more revisions than allowed. 3:52 Now, you are rarely ever going to complete a project where the client doesn't ask you to change something. 3:57 Revisions and alterations are part of the game. 4:02 Sometimes, revisions can be within the scope of the original work, 4:05 and should be considered part of the process. 4:08 Other times, the changes desires are beyond the original, agreed-upon scope of the project. 4:11 In such cases, you are well within your rights to charge the client for additional work. 4:16 These changes can be billed by your hourly rate, 4:21 or by a flat fee that is agreed-upon at the time of the change. 4:23 You should also specify what the course of action is if the client changes the project once it has started. 4:28 Is the client going to pay for all the additional expenses incurred, 4:34 and should they pay you for all the work already done, even if they aren't going to use it. 4:37 Lay it out in the contract. 4:41 In our third scenario, the client refuses to pay or takes too long. 4:44 Now, what happens if the client doesn't pay you on time? And how late is late? 4:48 Specify when you consider a payment overdue and what the penalty is. 4:52 There are a few incentives you can provide to make clients pay you on time. 4:57 You could charge a penalty fee for every block of time that the payment is overdue, 5:01 or you could offer a small discount if payments are received soon after the invoice has been issued. 5:05 Scenario 4 includes the client killing the project. 5:11 One of the biggest sources of frustration is when you spend weeks or months working on something and the client kills the project. 5:15 Protecting yourself from these kinds of situations 5:21 is one of the smartest things you can do as a freelancer. 5:24 Clearly lay out what happens when the project is killed, 5:27 that is, when the project is canceled for reasons outside your control. 5:30 Common charges are 25-50% if killed during the initial stages, 5:35 50% if killed after the initial stage, 5:39 and the full 100% if killed after project completion. 5:42 Now, sometimes the job can be canceled or rejected 5:46 because the final project didn't meet the client's expectations. 5:49 Regardless of what the client tells you, you should still be paid. 5:53 Industry standards for this are around 1/3 of the fee if canceled before completion 5:56 or anywhere between 50-100% for canceling after the project has been completed. 6:01 Your contract should provide clear and concise guidelines on what happens when the project is killed or canceled. 6:07 The client then knows what to expect and in the event that it happens, 6:14 you can negotiate payment accordingly. 6:18
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