Freelancer invoice / Client payment etiquette

[Nils Norgren]

I have always seen what we do is a service, the client comes with needs, a contract is specific to the need/agreement and scope of work. The tangible good, whether a digital file or an actual print, DVD, brochure is not in-its-self worth thousands of dollars, the intellectual effort and experience to produce it is what is valuable.

 

Architecture is a service, Engineering is a service, Graphic Design is a service. They all produce output but the drawings do not have intrinsic value, what the drawings represent is the design which is specific to the client, provider and circumstances.

 

There is also a consideration for those of us in the US, if it is determined that you provide a true "Product" you are subject to sales tx, which, if you are audited, and have not been collecting, you are libel for the last 3 years of gross, what ever your state sales tax rate is. This is a very dangerous place to tread.

 

if someone asks, being a service is much safer (in the USA) I am not sure how these things shake out in other regions. This is a third rail that is best left alone, in my opinion.

 

-Nils - Neoscape

Edited October 20, 2011 by NilsN

[Roodogg]

Reading your replies, I suppose I would agree that it is a service, but maybe a product also. Why are they mutually exclusive? You are working with a client over a period of time, perhaps discussing ways to move forward, with an ultimate view to sell an idea or a property. This could only reallt be described as a service. Though you are working towards completing a, dare I say it, "intangible product". If the client loved your work and requested delivery mounted, framed and FedEx'd, is that still a service?

 

But this idea can be transferred to anything in my opinion. If a plumber provides a service up until the point when your boiler is fixed. The "product" then becomes a fixed boiler. If you buy some cereal, the "service", is someone harvesting wheat, combining it with other ingredients, processing it, boxing it, liaising with ad men and ultimately creating the product which you purchase.

 

If the point though is that a product can be sold to anyone in the market for it, though a service is particular to a specific client and useless otherwise, then I completely agree and disregard the above paras.

Edited October 19, 2011 by Roodogg

[BrianKitts]

I don't want to detract from the interesting product/service debate, but I wanted to inject a little something I found from my days of freelancing since you asked about etiquette...

 

When I first started out, my "invoices" looked amateur and payments weren't always quick as you're finding..... I soon switched to using freshbooks.com which was awesome for managing all my clients, sending estimates and final invoices.

 

I seriously think my invoices were taken more seriously, because the format looks like the typical bill that you wouldn't want to go 30 days past payment. Additionally they make it really easy to send your invoices electronically with the option to submit payment through paypal. I found that actually worked better when working with large architecture firms, because the client could quickly pay me with their corporate card and then submit an expense report. Then the waiting is on their end and I have my money. You do lose 3% for using paypal, but I always liked it better paying the service charge and getting my money faster.

 

(not trying to advertise.... I don't work for them, but as a great service they deserved the plug)

[lee81070]

But this idea can be transferred to anything in my opinion. If a plumber provides a service up until the point when your boiler is fixed. The "product" then becomes a fixed boiler. If you buy some cereal, the "service", is someone harvesting wheat, combining it with other ingredients, processing it, boxing it, liaising with ad men and ultimately creating the product which you purchase..

 

It's really much simpler... we are creating something, in the same way an artist creates a painting. Doesn't matter that it's digital, we are still "producing" something. A plumber does not create the boiler, he fixes it. It was already a product, albeit a broken one. And the point raised about sales tax... you have to pay it on any sales you make of 3D models on Turbosquid I believe, so as far as the IRS goes, digital creations are taxable products.

Edited October 20, 2011 by lee81070
typo

[notamondayfan]

To me a service is something where there isn't anything tangible at the end of the process, say for example an IT technician fixing a broken PC, and a product is something that can be taken ownership of at the end of the process.

 

Our industry could be classed as both, for example if you work in-house with another studio for a week and assist in the creation of content, advise on work-flow, etc, then this is a service.

If you have any "deliverables" at the end of the project, whether it be 3D models, images, textures, etc, then these are products. You might offer your "services" to create products, for example my service might be 3D scanning, but my product would be the 3D file. As a rule I would say anything that is considered a service would be charged by the hour, and anything that is consider a product is charged once.

 

Anyway back on topic, just ring the company and speak to them regarding payments. Don't be as abrupt though! Give them a call and ask how they are getting on, and if the work has gone down well with everyone else, maybe enquire about future work too. Then after the pleasantries, ask if you could know when your invoice will be dealt with, say it's so you can keep your cash flow on track and you just want to know where your in's and out's are at. If they say the invoice is going to be done in a day or two, then great, but if it's going to be over a week or two, then just remind him of your terms, and say you would ideally need the cash sooner.

 

If you are struggling with cash flow, go to your bank, with the outstanding invoice, and see if they can arrange an overdraft until the payment is received. It seems you're only just staying afloat if you can't afford a phone line.

 

Also in future make sure your contract is watertight, and include all aspects of payments, maybe with deposits, sign off points (for example if you have a sign off point of complete all the modelling, you can then send that invoice before the job is complete, so the payments are staggered, this is important on long job, usually longer that 1 month), and when payment is due. Maybe add a late payment charge, but be careful as you dont want to ruffle any feathers too early in your career!

 

Oh and don't listen to excuses for none-payment, if they haven't been paid, then it's none of your business. You were contracted to do a job, and so should be paid no matter what.

[BVI]

Unless you have a prior relationship with a client which entails a good and prompt payment record - get your contract agreed too (in writing) and get a deposit. If they refuse to pay a deposit or sign/agree to your terms then chances are you will have a hard time getting them to pay your final fee in a reasonable amount of time.

 

Actually, that's called credit. So yea, you can buy things without paying for them up front. You know those things called credit cards?

 

Credit card companies have large legal teams and vast credit legislation to ensure that your balance is settled - this is a stupid comparison. The credit card company refunds the shop keeper regardless of your intent to pay for the service or product, so again, a stupid comparison.

Edited October 21, 2011 by BVI
speelliinnggg

[RyderSK]

My friend who is basicly an IT freelancer was recently forced by one company into their 90 days invoice payment schedule.

I mean that is horrible.... but now that I read some of the stories when people didn't pay after 2 weeks, they seems funny a bit :- )

 

The mentioned deposit is interesting idea.

 

One thing I kind of struggle in my head is, my fear of clients being put off but requesting deposit or similiar things.

Can;t even imagine asking them about upfront payment..or even slight part of it.

[BVI]

One thing I kind of struggle in my head is, my fear of clients being put off but requesting deposit or similiar things.

Can;t even imagine asking them about upfront payment..or even slight part of it.

 

Maybe is a country specific thing, in South Africa a deposit is assumed 99% of the time, especially for new clients. Not just in archvis, but pretty much any industry you request an upfront fee.

[BVI]

I actually don't know how you do business without a deposit. Cash flow is the life blood of any company and the deposit ensured that you can at least cover your costs to produce the work. Maybe if you are a freelancer doing one image then you could risk it, but when you are a studio producing 5-10 images for a client on a single job with no upfront fee that spans a 3/4 week timeline then you are asking for trouble financially.

[neil poppleton]

We credit check all clients and unless we dont know them or the risk is high, then we would not ask for a deposit.

[Arnold Sher]

I actually don't know how you do business without a deposit. Cash flow is the life blood of any company and the deposit ensured that you can at least cover your costs to produce the work. Maybe if you are a freelancer doing one image then you could risk it, but when you are a studio producing 5-10 images for a client on a single job with no upfront fee that spans a 3/4 week timeline then you are asking for trouble financially.

 

I agree about a deposit and we do that specially with new clients however i do not remember the last time we had 3-4 weeks on a project unless it is an animation. That is a reality of our studio and perhaps it is self inflicted however our clients are not prepared to wait that long even for 5-10 images and in that instance you have to go with trust as there is just no time to sort out the paperwork. Thankfully we have not been dropped and managed to collect from our clients 99% of the time..

[marthaholmes]

Hello. I've been practicing an upfront payment rule, ever since I had a horrifying payment issue with a past client. And most of my clients has no problem agreeing with that rule. I think it's in the matter of how you present the rule to your client. I believe, a down payment establishes trust in the transaction for you and your client. This is also to assess the client if they have any intention to pay at all.

 

Martha

[YYR]

I agree with Nicolas, it is regionally specific regarding the upfront deposit. Looks like North America is more against it while other parts of the world are more familiar with it. Our past clients from middle east had no problem with 50% down, though a lot of the contracted architect firms were from the US . I guess mainly because we worked directly with developers.

[Noise]

If you can get a deposit up front this is by far the best way but, if you are not comfortable doing that, operate a pay on delivery system. UNDER NO CIRCUMSTANCES enter into another companies 30 day payment procedure or anything that might delay payment after the media has been handed over - this will kill your cash flow and in my opinion is a wreckless way to operate especially in this economic climate.

[Tommy L]

If you can get a deposit up front this is by far the best way but, if you are not comfortable doing that, operate a pay on delivery system. UNDER NO CIRCUMSTANCES enter into another companies 30 day payment procedure or anything that might delay payment after the media has been handed over - this will kill your cash flow and in my opinion is a wreckless way to operate especially in this economic climate.

 

I wouldnt be that rigid. Most large companies pay all their vendors on a 30 day cycle. They just pay everyone in a big bunch, easier on the accounts dept. Large payments frequently have to go into a draw on a projects' loan account, which requires application and clearing. They wait until they have a stack of invoices before doing this as they incur a fee on the number of draws they make.

I would also mention that I have never been paid before or upon delivery (except for deposit, which I take with new clients), I always hand over the work with an invoice and then wait for payment.

[YOHKOH]

My 2 pence +VAT

 

Just simply agreed scope of service with a price attached for whatever it is you are going to be doing.

Whether its to work for 40 hours up to an agreed date on design development or to produce a visual.

 

Include something which gives a time frame to allow for changes if you are doing the latter and state that extra time will be charged at a specified rate but you should inform the client if this is likely to happen.

 

30 Days from invoice seems to be the norm and I would say the idea of a deposit comes across as a little abrupt. If you explain that you are a sole trader and that to keep cash flow on track you need money coming in. I'm sure that an incremental payment after seven days would not be unreasonble.

Best thing to do is just discuss it and be open, do the agreed work and expect to get paid for it.

 

Just be honest friendly and professional, and remember that visualisers are usually not high on their priorities when they have to deal with projects going awry and getting paid themselves.

 

Sad reality is that the industry is full of many scurrilous people who will try to back out of payments when they can. I've seen Architecture firms go under simply because they didn't get paid, despite having reams of appointment documents and contracts in place.

Some good advice is not to rely on one client to sustain your cashflow, I heard it somewhere that no one client should make up more that 15% of your turnover.

 

 

Architects and developers are used to prdoucing appointment documents themselves and should not flinch at the idea of signing an agreement, if they do, then avoid them.

[taleequale]

Never give final work before being payed.

 

bye

[M V]

If you asked a contractor to start work with no deposit and that you will pay him months after the construction is complete, what would they say?

 

The industry has changed in the last few years. Maybe we used to be able to let clients get away with getting finals and paying much later, but in the day and age of developers, architects, and projects going upside down overnight I will not take the risk. I do not start work without 50% deposit and I do not deliver finals until the invoice is paid in full. I have never had a client debate it with me. Maybe the bigger studios can do 60 net, but I just cannot do it. You wouldn't walk into a department store and take a jacket and tell the clerk you'll pay him next month. You may do this on a credit card, which is fine. You can pay me with a credit card as well.

[Tommy L]

Call mne the odd one out here, but I dont take money up front for a job thats less than five grand and once Ive been working with a client for a while I frequently work without a contract. Im sure it will burn me one day, but up till now Ive been paid for every piece of work Ive done.

New clients ALWAYS have a contract with though and if I smell a rat I turn down the job.

[davismelville]

I have started to move in this direction of % payments according to how much work is done. But it does boil down to principle. I have experienced big companies wanting renderings for million dollar projects but leave you in the shade for payment.

[adamd1]

Very helpful thread. There seems to be variances amongst the answers though.

 

In the US, is it reasonable to require deposits (at least for first time clients) and payment due on completion (no images delivered until payment is received) or is net 30 standard??

 

Providing images without receiving payment, especially from new clients, seems risky to me.

[Jason Matthews]

Adam, I typically give clients a breakdown of the process on the first page of the contract. The next page of the document outlines the payment structure as well as the timeline of the project. I state on the second page that I will not move forward until the client signs off on that particular stage and I have received payment. In my opinion it protects both me and the client. I don't get screwed by doing work that they don't pay for, they don't get screwed by receiving something that they did not approve, and it keeps the scope pretty well defined as they understand that additional services are just that and require additional payment.

 

The downside to doing this is that it is not suitable for all projects due to the time frame. On those projects in particular I ask for a 10% -20% retainer. For larger projects I do the same, especially animations. Larger companies are tougher to get payment from in a timely manner simply due to the size of the company. I have a client that takes 60 days from the completion of the project to process the pay request and cut a check.

 

I am not a fan of the 30 or 60 day rule, however it is pretty standard business practice.

[adamd1]

Thanks!