Scheduling work and taking deposits?
As I begin to receive more inquires for freelance work I’m having to spend more time thinking about when I can start each new project and the question has arisen as to when should you take a deposit from a client to secure your time?
Imagine this theoretical scenario:
Client A’s project is scheduled for the first two weeks of October.
Client B’s project is scheduled for the last 3 weeks of October leading into November.
Client C’s project is a big one lasting all of November.We’re currently in September and Client D has just approached you to spend 2 weeks working on their new project, but you can’t start until the beginning of December…
Do you invoice Client D for a deposit straight away to secure your time, even though you can’t start work on their project for 2 months?
Theoretically I would say yes for a number of reasons:
- If a client backs out you still at least have their deposit.
- You can plan your finances better knowing that work is scheduled in.
- You know what you are going to be earning over a period of time because quotes have been accepted and deposits paid.
- You clearly know when you need to start accepting more work.
- It shows the client that you are busy and have other clients so you must be good right?
- It shows they are committed to the project.
There is a concern however that asking the client to pay a deposit up-front when they won’t see a return for a long period of time could put them off?
Would a better solution be to schedule the project, but not take a deposit straight away and instead invoicing them 4 weeks before their project is due to start?
This way if they do back out you have a good timeframe to fill that slot with something else.
I’d love to hear any and all opinions on the matter.
23 Comments
To get your own globally recognized avatar visit http://www.gravatar.com/
Sazzy 25th, September 2009 at 1:54 pm
I’d be really interested to see what people say: RT @ryanhavoc Scheduling work and taking deposits? – http://retwt.me/hezk
This comment was originally posted on Twitter
dwradcliffe 25th, September 2009 at 1:58 pm
I’m curious about this too RT @ryanhavoc Scheduling work and taking deposits? http://retwt.me/hezk (via @sazzy)
This comment was originally posted on Twitter
Dave Randall 25th, September 2009 at 2:01 pm
I'd be inclined to invoice straight away for the points you mentioned. Your service is one that a client needs and wants, it's up to them to secure that service. I would treat the service like any other good that can be purchased - a loose example would be pre-ordrering a DVD.
Ben Bodien 25th, September 2009 at 2:03 pm
I would suggest taking a 25% deposit in order to secure the slot in your calendar. You can inform the client that this deposit is fully refundable should they change their mind, which they can do up to 2 weeks (or thereabouts) before the scheduled start date.
Depending on how many potential projects you have in the pipeline, you can say that if they cancel within 2 weeks of the start date, only half the deposit would be refundable, in order to give you a bit of protection.
Twiddle the numbers to suit your business, but I think every reasonable client would be happy paying to secure time.
Plus it helps your cashflow!
Elliot Jay Stocks 25th, September 2009 at 2:03 pm
I've never been too fussy with clients about when they should pay their deposits: as long as it's before the work starts, I'm ok with that. Mind you, you're right: it could leave you in a pickle if they pull out at the last minute so in that sense it's best to make them commit asap. I suppose in general I see deposits as a way of preventing them from doing a runner when you've done the first mockups rather than a time-securing thing.
But I think you're probably right to say that they should be invoiced as soon as a project has been pencilled in. It'd be best practice to say that you can't book it in securely (i.e: anything more solid than 'pencilling' it in) unless they pay a deposit up front.
By the way, it's kind of unrelated, but I'd recommend taking a 50% deposit if you don't already. I only took 25% until very recently and then realised that everybody else was charging 50%, which is obviously a much better safety net for us designers (and, more than anything else, helps with cashflow for larger projects).
Maxwell Lamb 25th, September 2009 at 2:05 pm
We're in this situation frequently - we're thoroughly booked for a long while at the moment, and while our turnarounds are fast, our lead times are currently long (we're hiring at the moment, in order to get things moving a bit faster).
It's principally dependent upon two matters:
1) What's your cashflow like? If you're hand-to-mouth, try for the advance deposit, and it provides you the stability to be able to service them better. If you've got reserves, it's still worth trying for an advance deposit - it shows that the client is serious, and so long as they understand the expected timescale, they should be fine with it.
2) Is the client comfortable with it? If they're not, it means either they're not committed to working with you, or they're potentially not in a good cash position themselves, which isn't good for you (you do the work, they then can't pay). If they are, the inverse is likely true.
The above said, it's dependent upon the specific client - we typically bend our payment schedules around what suits each client - if they're happy with a 50/50 split, great, if not, we stagger payments further.
Ultimately, though, the question is moot - your best friend is a well written contract, that binds them to pay you for the work you perform, and binds you to provide service to a certain level, and to a certain specification. We've learned this the hard way, and now have a pro forma development agreement that all our clients enter into, and renders the question of when they pay what largely redundant.
Cyril Godefroy 25th, September 2009 at 2:07 pm
I don't work as a freelance artist, more as a freelance developer. But I'd always ask clients to pay a deposit. Depends on the amount you ask also. I usually ask for 20% up-front, 20% when I really start to code, 30% when I make a first delivery, 20% at final delivery, 10% after 2 months.
That's for really big works.
My rule is to get 3/4 before you deliver.
Unfortunately most of my clients have now become people I know so well I usually wait until the end to get paid :-(
Aaron 25th, September 2009 at 2:13 pm
I invoice half up front and the rest once the project is completed.
Tim Marshall 25th, September 2009 at 2:18 pm
I insist on invoicing my clients/potential clients up front for all work. I do get lax on those that I'm doing repeat business for but this is generally because I know or at least suspect they won't screw me over!
25% is a fair amount to secure your time for working on a project and to me at least demonstrates the clients commitment to you as much as the other way round. I will refund if it doesn't happen and in full but fortunately thats yet to happen and leave a scheduling hole.
Another 25% then is due prior to work commencing too so I always have at least 50% paid up front and at that point none of that is refundable if at some point between then and completion they client pulls the plug. Backed up with a good contract this should work well; though I've yet to test it but the contract is pretty iron clad but friendly too!
Ultimately it's a personal preference as to when you invoice clients but it is more normal to insist on money up front by way of a deposit.
As a side issue I rarely release a site or work live until the client has paid in full (cleared funds too) unless it's a site I host and they can't get hold of it or I trust them. You have to cover your back, if you haven't been screwed over; rest assured if you don't do this one day it will happen to you!
Relly 25th, September 2009 at 2:19 pm
I deal with these things on an individual basis but roughly it is 50% to book me in and I book up to three months ahead, leaving small gaps to sot in smaller jobs that come up.
If you haven't got 50% now then come back to me when you have, but I won't hold a booking and reserve the right to fill it, cos I gotta eat!
Si Jobling 25th, September 2009 at 2:27 pm
As long as you maintain the agreement with the client, supplying them with full details of what the deposit entitles them to, there shouldn't be a problem.
How about turning it around, suggesting to the client that by putting down a deposit now, you are securing their time well in advance? If you previous clients over-run into the new client's project, you have a clause in your contract to either allow 5 days grace or you will refund X amount.
Just a thought. It is a difficult situation but, as long as you're honest and transparent with the client, they should be sympathetic to your circumstances. If they really want your services, they'll be happy to put down a deposit.
I wouldn't go as high as 25% though, maybe 10-15%. At the end of the day, you are selling a service that is desirable to the client and they would like reassurance they will get that service. From their angle, if something does actually happen your end which let's them down, 10% isn't a huge loss to the client - 25%, however, is quite substantial.
Ryan Taylor 25th, September 2009 at 2:27 pm
@Ben: Refundable deposits before a certain time is an excellent idea! Great advice.
@Elliot: I'd be interested to know if you just take the other 50% on complete of if you break it down more? Do you change your payment structure depending on the size of the project?
@Maxwell: Good advice, and having recently referred a client to our contract, I'm very pleased to have strong one in place. :-)
@Cyril: I find that invoice chasing can be a nightmare. Breaking them down into anything more than three payments must be hell itself?
Tim Carr 25th, September 2009 at 2:34 pm
This is a no brainer. A non refundable deposit always secures the work, provided you're honest and upfront about when you're able to start and finish the work. It commits the client to the job (trust me, nothing talks better than money), and gives you peace of mind that you have work scheduled in, so you no longer need to seek work for that period of time.
Not requiring a deposit spells disaster, even if the project is 3 months up the road. You'll have gone to all of the trouble to speak with the potential client, agree the details, agree the price, agree in principle to begin in December, only for the client to have a couple of months to change their mind and pull out X weeks / days / hours before you're due to start. You then have to go through that entire process again with another client / prospective client, and you've wasted time previously.
I see no mileage in offering a refundable deposit, as it puts you in the same situation as above.
If a client's uncomfortable with committing with a deposit payment so early, it's likely to be because:
- they want the job doing quicker (in which case you're unlikely to be able to help - perhaps refer them to a fellow freelancer?)
- they're unsure whether they want to comitt to the project (is this a client you really want?)
- they're unsure about handing over an amount of money upfront so far in advance (your portfolio, credentials, testimonials and deposit amount should all seek to reassure a concerned client).
Speaking from personal experience, I've never changed my terms of business. It's a 25% deposit upfront to secure the work, regardless of whether it's a new client or existing client. Formalities such as money / payment / your livelihood need to be firmly, but politely, established from day 1.
Ryan Taylor 25th, September 2009 at 2:52 pm
@Tim: I currently take 25% deposit, 25% at design sign off (which is written into my contract that even if the client isn't happy with the design after 2 iterations, they must still pay before ceasing the project) and then 50% on completion before the site goes live. So far this has worked well.
@Relly: That's the thing isn't it, bills need paying, food needs to be put on the table. I am considering altering my payment schedule to 50% deposit, 50% completion after all the responses here.
@Si: Hmmm... Now you've got me thinking the other way, the plus site of my currently method 25%/25%/50% is it's a couple of relatively small payments to start followed by a larger one. Your reference to time slippage though I think can be better avoided by leaving small gaps between project as @Relly does. This can be used for admin, or smaller jobs if circumstances dictate.
@Tim Carr: I'm inclined to agree with all that you've said. The best clients are the ones that are eager to secure your time, pay their invoices so that you can get on with the job and reply to your e-mails in a timely manner, it's obvious who the good clients are when you start talking money. Thanks for the advice.
Ben Bodien 25th, September 2009 at 2:55 pm
To clarify Re: Elliot's point about 50%, I meant take 25% on contract signing to secure the slot in the calendar, then you can take another 25% on commencement so you're still getting your 50% upfront.
Iestyn 25th, September 2009 at 3:18 pm
I am yet to start taking deposits, but really feel the need to start incase clients turn around and decide that my services aren't required.
Should I ask for deposits off my current longterm clients or leave as is?
I have never even asked for any client to sign a contract, I've been freelancing for 9 years now!
Can anyone point me in the direction of a contract example I could base mine on?
Thanks
Ryan Taylor 25th, September 2009 at 3:22 pm
@lestyn: You've been lucky to not get stung if you've never taken a deposit or signed a contract after 9 years! I think it's fine to start invoicing your long term clients for deposits just explain to them why you are doing it and that now it's your policy to do so, they should understand you situation.
As for a contact have a look at Andy Clarke: http://24ways.org/2008/contract-killer
Good place to start.
Jason Klug 25th, September 2009 at 4:35 pm
My life has been made a lot easier since I started taking 50% upfront and 50% within a week of delivery (I host most of the sites I develop, so "handing files over" before final payment is less risky).
Mostly, I just don't like having to track multiple payments vs. deliverable benchmarks... I have enough work that I don't want to waste time on extra business administration.
In the last month I've begun taking 25% refundable deposits if the client books more than 45 days in advance (then the 25% upon start of work, and the usual 50% just after delivery). I really like the idea of having a non-refundable portion of that early-booking deposit X number of days before the scheduled start... I haven't run into a situation yet where that would apply, but it offers some good peace of mind and I'm pretty sure clients would understand (after all, other professionals take deposits, and there has to be some kind of penalty for backing out at the last minute... otherwise, what does holding onto the deposit do?).
Really glad you wrote this post! It's good to talk biz admin once in a while, and get a feel for what's working / not working for others.
Paul Burton 25th, September 2009 at 8:08 pm
At a bare minimum, 50% down to initiate the project and 50% upon completion. Work does not begin until I have a signed contract and have received the down payment.
If you are in the fortunate position of having to schedule work, then a non-refundable 25% down payment to "hold" the booking is absolutely fair. Think of it as a dual purpose fee 1) it reserves your time and 2) serves as a cancellation fee (or, "kill fee").
Keep in mind that clients do change their minds. When you book a project, you are committing a specific amount of your time to a specific client. This means that the time you set aside for client A will prevent you from taking too much work from client B. If client A pulls his project at the last moment, the time you had set aside for his work becomes available. Without a cancellation fee, you will not only have lost the income from the project that was pulled, but you will have lost the project you could have taken instead. Very rarely will you find yourself with so much potential work that projects simply fall magically into vacancies in your schedule.
Your time is valuable.
Phil Matthews 25th, September 2009 at 9:43 pm
Great post Ryan and lot of interesting comments.
For the first 3 years of freelancing full-time I didn't charge a deposit (crazy, I know!). I was very naive and assumed all clients were lovely and would pay up in the end. Then, out of the blue, I had a non-paying client which made me realise how stupid I'd been. I'm pleased to say I now charge 50% before commencing work and 50% at the end and it has made such a big improvement to my workflow and security in general.
When it comes to booking in work I really need to work on how I do this. I've been reluctant to book in work ahead of time because I didn't think clients would want to pay a deposit if they would have to wait several weeks before I could commence work. However, since reading the comments on this post it seems people have success with this method I am going to give it a go. At the moment I try to start too many jobs at the same time which can often lead to burnout and too many late nights.
Booking jobs in advanced is something I really want to try more (as long as I can convince the clients to secure my time with a deposit). Relly sums it up well:
"If you haven't got 50% now then come back to me when you have, but I won't hold a booking and reserve the right to fill it, cos I gotta eat!"
Iestyn 26th, September 2009 at 7:35 pm
Thanks for the info on 24ways.org, I'll check it out.
Another issue I have no clue what to do with is that on my invoices I state that the amount due should be paid within 14 days, what can I do if people don't pay within the 14 days? I've heard that some people charge a percentage of the total if payment is late. Does this work? What does everyone else do?
Ta
Angeletti Group 8th, October 2009 at 6:06 pm
I would always charge a deposit up front, and hold their money in an interest bearing account until the start of the project. Then, if they decided to pull the plug, I'd say "OK, here's your money" and be the hero who didn't keep their deposit. This way three awesome things happen:
1) You most likely secure the work
2) You earn interest on their money (or even day trade it in your TD Ameritrade account LOL)
3) You get to be a philanthropist and give back their money if they want to wine about it
Larimar Earrings 23rd, November 2009 at 1:29 am
Nice. I like the advice. One thing I would say though is: Don't take work when you're not qualified (not to the blog owner, but to the public). The thing that kills me is that every client that comes my way says "Oh, I don't have that kind of money. I already spent 3500 dollars on developer X and got nothing in return." I then have to explain that if 3500 got you screwed over, then surely you don't expect any better for less money. The only reason I bring this up is that the "Let's take a deposit now and worry about getting to it later" mentality is similar to the "Let's take the contract now and worry about if we have the skills to do it later" attitude.