Why freelancers should ask for payment in advance from new clients
Every freelancer at one point in their career has completed a project for a client, only for that client to magically disappear without a word (or a penny). It’s frustrating, emotionally and financially draining, and just flat-out wrong.
This article explores ways that freelancers can avoid these situations by asking for payment in advance.
Everyone deserves to get paid for the work they do - especially in the age of the coronavirus where every penny counts. That’s why freelancers should ask for a deposit, or full payment upfront when taking on a new client.
Deposits vs. full payment in advance
Depending on the type of work you do and your previous conversations with the client, you can either ask for a partial deposit or payment for the entire project in advance. Most of the time, a deposit will be sufficient to ensure that the client is serious about the working relationship.
However, if the type of work you do only requires a couple of hours of work, for instance, writing a short article, it would be better to ask for full prepayment for your first project. It’s up to you to decide if it would be worth it to ask for prepayment in these scenarios.
Ensures that the customer is trustworthy
When you’ve already worked with a client, and they paid you in a timely fashion, then asking for a deposit or prepayment for future projects isn’t necessary.
When you don’t have a previous relationship with a client, asking for a deposit will act as a ‘test’ to ensure that they’re willing to pay you for your work.
Deposits are quite common in the freelance world, so asking new clients for this is standard practice. If they’ve previously hired freelancers, they should already know this.
If the customer is extremely reluctant on putting down a deposit and insists that you do all of the work first, then this should be a red flag. Unless they have a very good reason not to pay a deposit, then they may not intend to pay you at all.
Once money is invested, the client is more involved
When a client has already put down money for your work, they’re likely to be more involved in the process. This means quicker responses to your questions, more detailed information about their requests and an overall smoother process that will help you finish the project on time.
If they have no monetary investment in the project, then they may not be as actively engaged. They make take longer to answer your questions making it harder to meet your deadline.
Ensures an even cash flow
If you’ve worked as a freelancer for a while, you may notice that there are periods where lots of money is coming in, and other periods where there’s none. This happens especially if your projects take months to complete.
Asking for a deposit ensures that you’ll have some money coming in when starting the project, and when finishing it to generate a more even cash flow.
When you shouldn’t ask for a deposit
It’s up to you when you think it would be appropriate to ask for a deposit or prepayment based on the type of work you do, and your previous relationship with the client. However, here are some suggestions on when you should not ask for a deposit:
You have a working relationship with the client and they’ve paid you on time for previous projects. You know that they are trustworthy and will pay you for your work.
Well known, large companies. If it’s a reputable large company, like Google or HSBC, then you can rest assured that they’ll pay you.
Projects worth less than £50. This is a grey area, but you should determine if it’s worth the time and hassle of getting a deposit for a short project.
How to make an invoice with a deposit
Invoicing software makes it simple to issue an invoice with a deposit. Once the money has been received, you can simply enter the deposit as an item line on the invoice.
As an example, let’s say that Mel is a freelance web designer. A new client has approached her to design their website. After discussing the project, Mel advises that the website will cost £1000, and the client will need to pay a 10% deposit as per her payment terms for new clients.
Mel issues the first invoice for just the deposit of £100 and starts the project once payment is received.
Once the project is complete, Mel issues the final invoice for the remaining balance. The deposit should be displayed on this invoice as an item line in the negative amount.