Working as a freelancer comes with a whole pack of benefits. You improve your cash flow, get to pay your bills on time, be self-employed, and work from the location of your choice. However, there’s one challenge; getting your clients to pay on time.
Not being upfront with your clients from the beginning about when and how you want to get paid may see you spending a lot of time chasing after payments or even dealing with nonpayment. That’s why it’s essential to include freelance payment terms in your contract.
The payment terms clarify your expectations in writing and urge the client to respect their due date and payment methods. Therefore, freelance payment terms can be defined as the payment instructions you include in your contract, invoice template, and quotes. They guide your client on how and when you want to get paid while also being beneficial to client relationships.
Essential Freelance Payment Terms To Include in Your Contract
When writing your terms, remember to include how you handle late payments, whether you offer discounts, and which currencies you accept. Below are some essential payment terms to include in your contract to save you from regularly having to follow up about payment:
Expected Fees and Terms of Payment
In this section, include the amount you expect, when to be paid, and the mode of payment. The section also clarifies whether you wish the client to pay a downpayment on booking, a complete payment upfront, or pay in milestones. To be on the safe side, consider asking for a 50% upfront deposit and the remainder on completion just in case the client decides to back out of the contract halfway.
You may find it hard to ask your client for an upfront. However, think about it this way; when you are a freelancer, the client pays for your time, which is available in a finite supply. By paying upfront, the client books a slot in your schedule. Failure to pay means that the client hasn’t booked a space, and therefore, there’s no guarantee that you’ll be able to work on their project as per their expectations.
Payment Due Date and Late Payments
When writing your invoice, don’t forget to include the date the invoice payment is due. Adding this helps the client know when they’re supposed to release the paycheck. Some standard terms to familiarize with when writing your invoice include:
- Net 7 - the payment is due seven days after the invoice date
- Net 15 - the full payment is due 15 days after the invoice date
- Net 30 - Net 30 payment terms stipulate that payment is due 30 days after the invoice date
- Due On Receipt - the payment is expected as soon as the invoice is received
Net 7, 15, and 30 are the most suitable for freelancers as it allows you to maintain a consistent billing schedule and easily track and manage your payments.
Include in your terms that you charge late fees interest in case of late payments. Also, prompt the clients to pay early by offering a discount for upfront payment. Make sure that the interest is reasonable so as not to scare off clients.
Cancellation Policy and “Kill Fee” Clause
What happens if the client suddenly decides to cancel the project? You should state clearly in your contract whether you accept a cancellation, after what timeframe, and what happens to the client’s deposit if they cancel. Suppose you have a retainer agreement, state how much notice you or the client should give before canceling.
The “kill fee” clause saves you if the client suddenly decides to cancel a project you’re working on. The clause states the amount the client needs to pay you for the time you’ve invested in the project. For instance, you can indicate that the deposit is non-refundable and will act as the “kill fee” and compensation for work already done.
There are various payment methods available for freelancers. Different options have varying terms and conditions, some of which might not favor you. Make sure you define in the contract what payment method works for you. Popular payment options include:
- Bank Account Transfer
- Debit or Credit card
Clarifying your preferred mode of payment avoids an instance where you end up with a check when you would rather prefer bank deposits or online payment.
It’s essential to agree on the amount of work and the type of contract, whether hourly or fixed. Defining additional work on your contract helps you if you agree on a fixed rate for a certain amount of work, but the client ends up assigning you more for the same amount.
You can confidently refer to all the deliverables defined in your contract if the client pushes for more work when you have all the deliverables defined. Also, remember to indicate how you’ll handle extra work. For instance, you can change the contract from fixed to hourly.
Copyright and Ownership
Your work ownership depends on whether you’re working as an employee or as a freelancer. As an employee, your work belongs to your employer, but as a freelancer, the work is yours until you transfer the ownership to your client.
When writing your contract, clarify whether you wish to transfer the ownership of your work to the client and when the action will take place. For instance, transfer of ownership can happen as soon as you submit the final draft or after the client makes full payment.
Be sure to specify what parts of the work the client owns; that can be the final draft or all the ideas you’ve proposed in the project. It’s vital that you familiarize yourself with copyright laws and don’t shy off from seeking legal advice where you are not sure.
Using Client’s Work For Your Portfolio
As a freelancer, you need to showcase your previous work on freelance sites to gain new clients. However, once you transfer ownership to the client, you’ll need permission if you want to use the work on your portfolio.
You can consider including a clause stating that you retain the rights to use certain parts of the project you’ve submitted for marketing and self-promotion. Again, a reasonable client won’t have an issue with the clause as they will have hired you after seeing your portfolio.
Tips For Writing a Freelance Contract
Writing an airtight contract prevents misunderstandings from arising, leading to broken relationships. Here are some tips to help you write a concise contract.
- Use plain and concise language - avoid writing long and confusing contracts that nobody will be interested in reading. Instead, use simple terms that anybody can understand. However, be sure to include all your legal bases.
- Ensure your contract is up-to-date - working as a freelancer means that you’re running a business. And just like any other venture, you’re likely to run into some pitfalls. So be sure to include a clause that states how you’ll protect yourself if the unexpected occurs.
- Include dates - when writing a contract, remember to include the start date and the expected end date. If it’s a long-term project, indicate how long you expect it to last and when you’ll renew the contract.
- Use official business names - when writing a contract, be sure to include the official business names and specify if your client is a corporation or an LLC. Having the correct name protects your interest in case a disagreement arises before the contract is over. Watch out for clients that use personal names, nicknames, or have no business name as they may be a fraud.
- Be professional - make your freelance payment terms look professional by using professional documents such as invoices, quotes, and contracts instead of sticky notes or a brief mention on an email. The clients are more likely to adhere to your terms if you include them in professional documents.
Benefits of Having Freelance Payment Terms
Writing a freelance writing contract offers the following benefits:
Misunderstandings are bound to arise in any relationship. When that happens between you and your client, you can always refer to the contract to clear things up. When writing your contract, include a clause that indicates that only what is included in the contract acts as an agreement between you and the client. The clause prevents the client from using something you discussed over the phone against you.
Decreases Odds of Getting Scammed
One of the primary reasons why you should draw a contract is to avoid getting scammed. A contract keeps scammers off your radar as they know that you can sue them or subject them to public shame.
Ensures That the Client Understands Your T&Cs
A contract helps you stipulate your terms and conditions early, hence avoiding mistreatment and being taken advantage of by the clients. Use the contract as a way to set boundaries and make everyone take your work seriously.
When working as a freelancer, your ability to cover your bills heavily depends on how and when you get paid. Not having a contract means that you can easily get stiffed or always get late payments, which will make you lack the financial freedom you desire.
You can encourage your clients to pay you on time and demonstrate your professionalism in your line of work by including freelance payment terms in your contract. However, if you’re not sure how to keep your terms reasonable, be sure to seek professional help; it’ll be a worthwhile investment.