Getting Paid, Building Contracts, and Client Considerations when Working for Yourself

I understand the concern of a company not wanting to pay out large amounts of cash up front, wait no I don’t, and here is why. When I start a project with someone think of that first payment as a retainer, deposit, or good faith to get you started. If you are working for a company and are not on their pay roll this is your salary. It is my salary and how I pay my bills.

Payments

There are a few ways I normally offer to do payment plans.

  • 50% up front and once it’s half way done another 25% and then the final 25% before the project is handed over to the client with a signed contract saying they approve the site and no more changes are needed.
  • Monthly payments (good luck with this one unless you set their credit card up on auto payment)
  • Weekly payments (again, good luck)
  • Payments in fourths (25% up front and then another twenty-five percent once you’ve reached certain milestones)
  • Hourly rate which is paid out weekly, monthly and often with a retainer
  • Monthly retainer (I prefer this one, with an up front advance like a lease on my time.)
  • Cash – BAD IDEA. Can’t track it, prove it was sent, prove it wasn’t sent, and leaves no paper trail (no pun intended).

Payment Options

  • Check – If you can ever get them to send it to you this is a nice option, if it doesn’t bounce because you don’t have to pay fees to cash it (well except your business banking fees).
  • Paypal - Convenient for receiving money online. You are initially capped at taking out $500/month unless you prove who you are. Receiving auto payments from this service is expensive. If you are sending goods, make sure your descriptions are thorough or else your buyer can claim it was grossly mis-represented and Paypal will always side with the buyer on this one. Contracts are there to save your ass, so don’t half-ass them.
  • Google Checkout - Very similar to Paypal, and occasionally slightly cheaper on how much their rape your paychecks. Both programs take somewhere in the 2-4% range from whatever money you receive.
  • Money Order or Wire Transfer – I refuse to get paid via this way. It’s all around inconvenient for both parties in my opinion.
  • Various online checkout services that let you receive auto payments, credit cards, e-checks, and debit cards are convenient but expensive if you don’t make over $4000 gross each month. The setup fee averages about $90 with an average monthly fee between $40-$130 and sometimes they also do per-transaction fees or percentage of money received.

Considerations

  • Late Fees - some states restrict how much you can bill an individual, so make sure their company is legitimately registered with an EIN number from the state.
  • Small Claims Court – If you’re client refuses to pay you, this is a last line of defense for getting that money they owe you. Make sure you have a contract, any emails affirming they owe you and the project, and warning letters. You may want a lawyer if the bills exceed $5000. Remember if you are suing a business and not a person, the business can claim bankruptcy without hurting that person’s credit, so try not to get to the point where they owe you crazy amounts of cash.
  • Creditors - They will want a percentage of whatever money they recover, which you should just accept if you can’t get the money yourself. Some money is better than no money right? They may also want an upfront or retainer fee.
  • Copyright & Intellectual Property - Who owns the right to the work you’ve done pre-payment and when the work is finished? This includes brainstorming and training (you may want to say so in your contract). So if they don’t pay you, they have no right to use that information or hire another company to take the ideas or work you’ve done for them and give it to someone else.
  • Money Lost – This is important to put into contracts with contractors and clients. Basically if you want paid for money you could have made but didn’t because of all the time you had to waste hunting them down for payment, or time you spent working with them and then they play the hide and seek game add in fees, court costs, lawyer fees, and any other fees you would want them to pay for negligence. In the case of contractors, what if they dilly dally, are inefficient, constantly give you poor-quality work, or do something in a meeting that is so embarrassing you lose a client? That information can also go into contracts.
  • NDA (Non-Disclosure Agreement) – What can you talk about or not talk about when a project is finished, when you can talk about it, how that information can be used in future projects, and whether or not you are allowed to outsource work to other contractors or companies.

Thoughts? Recommendations? We live, we learn, and share that information to help others avoid the same mistakes and snake bites. My biggest snake bite is the client who let’s me finish their work then goes MIA on paying me.