One of the most important things for any business to keep in mind, is whether you should charge your clients up front, or once you have delivered the work.
If you charge up front, this, of course, has the considerable advantage of meaning you definitely get paid. It means that you don’t need to worry that your client might go AWOL and stop answering emails, leaving you with no real recourse.
At the same time, charging up front means that you get the cash sooner. This is important from a cash-flow perspective, but it can also be very beneficial in terms of investments if you run a larger organization. That is to say, that money that reaches you sooner, can be reinvested into your business, or even in other assets!
But there are downsides. Charging up-front can be considered rude from the clients’ perspectives. Why should they pay for something that they have yet to receive? As such, it may even actually deter some of your clients from working with you in the first place – essentially meaning that you don’t get the cash at all.
With all that said, how do you decide what is right for you, or what is right in any given situation? In this post, we’ll explore whether you should charge clients up front, or on delivery.
Factors to Consider
First, consider the following factors:
Size of the Job
The larger the job, the more reasonable it is to expect at least some kind of remuneration up-front. If the client has ordered a very small 100-word article, then asking for them to pay up front is unreasonable and may come across as petty.
On the other hand though, if a client orders a huge web design project that will take you and your team months to complete, then they should recognize that you are taking on a significant risk unless you ask for at least some payment in advance.
Likewise, in such a scenario, you will likely need the cash to manage your own cash flow: to pay your own staff, and to maintain running costs while the work is being completed.
The Risk vs Reward
You should also consider the risk versus the reward at this point. We saw earlier that taking on a very large project with no up-front investment can be considered a risky move. The longer the project takes, and the more it costs, the more devastating it would be for you if the client doesn’t pay.
But at the same time, there are other ways to mitigate this risk. For instance, if the work that you are completing is something that another client might be interested in buying, then you at least have a contingency plan. In this scenario, the risk to you is now significantly decreased.
On the other hand, if a client is incredibly valuable to you – if the amount they are paying is so huge that it has the potential to hugely benefit your business – or if the work would be a huge boost to your portfolio – then you might consider taking a moderate risk.
Ultimately, you need to consider each scenario on a case-by-case basis. That might mean making an exception sometimes.
Is There a Contract?
Another way that you can mitigate risk, is to write up a contract. By doing this, you will be able to ensure that the other party will honor their agreement – and you’ll have a course of action to follow if they do not.
Remember that a contract isn’t necessarily going to be ironclad. This is especially true if you’re working online, where it can be very difficult to follow through. Are you really going to pay for a lawyer if they refuse to hold up their end of the bargain?
Still, you can take some comfort in the fact that the client was willing to sign the contract at all. That, and in some cases, it will make it easier for you to follow up – as long as you have the means.
Do You Know the Client?
This is a big one. If the client is someone that you have been working with for a long time, then this makes it considerably more sensible to offer to deliver the work first.
At this point, the client has hopefully demonstrated that they are trustworthy, and you hopefully have developed a good relationship. If that’s true, then it can seem a bit rude to suddenly start demanding payment up front. The client will be left wondering what changed!
Keep this in mind if you ever volunteer to deliver the work up front. You should only do this once if you are willing to keep doing it.
Alternatives to Making Clients Pay Up Front
So, with all that in mind: should you charge up front or on delivery?
The best answer might sometimes be ‘neither’.
This is not a binary decision: there are other options. For instance, you can ask your client to pay half up front and the remaining balance on delivery. This is a great compromise and one that motivates you to do your best work, while at the same time ensuring you’ll at least be able to cover your costs.
And if the client doesn’t pay upon receipt? Then you can keep that initial down payment and the work that you completed for them.
(And of course, there is no strict requirement for that down payment to be 50% - you can ask for as much of the money up front as you wish).
Yet another option is to be paid in installments. This might mean that you receive a payment for each milestone that is agreed up-front. OR it might mean that you receive payment on a rolling basis until the work is completed – this works best if you are charging ‘per unit’ or if you are charging per hour.
In the former scenario, you might charge ‘per word’ as you work on a large batch of content. In the latter, you might charge at the end of every working day during a construction project.
You can even become an independent contractor, draw up a contract, and then get paid daily until the contract is terminated by either party.
Or why not incentivize up-front payment by offering a discount to clients that are willing to pay in advance?
Another question that is somewhat similar to the previous one, is whether or not you should provide ‘free samples’.
When you sell a number of different projects, you will find that your clients request free samples of various kinds. For instance, if you offer logo design, then they might ask you to design a quick mockup to demonstrate your skill and understanding of the project. If you sell writing, they might ask for a small piece of content.
Should you acquiesce?
In most cases, probably not.
When someone asks for a free sample, they are effectively asking for something for nothing. Remember, your time is your biggest asset, and you deserve to be paid for it.
If a potential client wants to see what you’re capable of, show them a portfolio of your previous work, or give them references that can vouch for you. And if they want you to demonstrate that you ‘understand the project’, then that really just takes a consultation.
Provide a free sample on the other hand and you’ll find that very often, you never hear from that client again. Not only that, but you are unintentionally sending the signal that the work you provide is not highly valuable. If you’re willing to give any work away for free, then why should your client pay for it at all?
The Most Important Point
Whatever you ultimately decide is up to you. The single most important point though that everyone should follow, is that you must make sure that you are clear about the agreement up-front.
If you fail to communicate effectively that you expect money up-front, then this will only lead to wasted time and complications. On the other hand, if you clearly and politely state your terms before doing business, then your clients will have no real reason to be dissatisfied.
Better yet, why not create an order form that has a payment attached? This way, the client doesn’t do business with you until you have received their payment. This can also be a great way to remove other issues with your current workflow.
If you find you are dealing with a lot of ‘communication overhead’ (unnecessary emails that are taking up the majority of your time), then you can iron this issue out by outlining how much communication and through which channels is included in their order.
This is something that you can evolve and practice over time. Tweak your ordering process, your prices, and the rest, and eventually, you’ll find a system that works well for you AND your clients.