In a post yesterday, I discussed the process of setting an appropriate rate when quoting for a contract job. A few comments noted that setting up payment terms, as well as an agreed rate, is also important.
There are basically three payment models you can use when setting a schedule with prospective clients.
- Pay on delivery
- Payment by a schedule
- Payment based on some other event
Choosing the best option can be negotiated with the client. However, you need to ensure that the agreed payment system fits in with your cashflow and other business requirements.
The simplest model is to get full payment on, or within a fixed period of, delivery. This is great for small jobs. For larger jobs, setting milestones at which part-payments are made is useful. It means that the client only pays as they receive parts of the work and you get a steady stream of income. The final model has payment based on some other event. For example, many freelance writers are paid on publication of their work.
A critical element that is often not properly considered is that it’s not enough to put the payment conditions in front of the client. You must discuss them and ensure that they are understood and agreed.