If you have trouble getting paid on time or you’re looking for ways to filter out flakey clients, it may be time to include deposits in your standard billing practices.
From when to ask to how much to request, learn the basics of freelance deposits to help you start off on the right foot.
What Is a Freelance Deposit?
A freelance deposit is similar to a down payment on a car or home. It’s when you ask a client to make partial or full payment before you start work on a project.
When freelancing, deposits are usually based on the amount detailed in your initial quote.
For example, if you were to request a 50% deposit upfront, your client would be required to pay half the amount you outlined in a detailed project estimate at the outset.
Once a client makes a deposit, the amount is deducted from the following invoice.
For example, if the total amount on your quoted estimate was $1,000 and the client makes an upfront payment of $500, you would charge them the remaining $500 on their invoice upon delivery of your service.
Benefits of Upfront Deposits for Freelancers
There are many benefits to asking for full or partial payment upfront. For example, asking for a freelance deposit from new clients can:
1. They Reduce the Risk of Nonpayment
While you don’t want to start a client relationship based on the assumption that they won’t pay you, the reality is that some clients are harder to get paid by than others.
Until you establish a strong working relationship with one another, it’s impossible to say whether you can trust a new client to pay promptly.
Deposits ensure that even if a client cancels a project or completely disappears, you’ll still get something for the work you put in.
Plus, clients who have already invested money into a project are more likely to stay engaged and involved through its completion.
2. They Provide Better Cash Flow
Regardless of your billing cycle, payments for freelance work can be sporadic and difficult to predict. Deposits provide you with cash before you send out an invoice, giving you better cash flow and spreading out incoming payments over a longer period.
This gives you a chance to pay your bills, plan out a budget, and cover any business or project-related expenses that come up.
3. They Filter Out Problem Clients
In certain clients, an unwillingness to pay a deposit upfront is a red flag. If they aren’t willing to pay you now, will they actually pay you when you send a final invoice?
However, if a client refuses to pay a deposit, make sure to consider the reasoning behind the refusal before canceling a contract.
For example, there’s a big difference between a large corporation with specific freelancer payment policies in place and an unknown new client who doesn’t have the funds to cover a deposit.
Use deposits as a factor in determining whether you want to move forward with a client, but not necessarily as the deciding metric.
4. They Make for More Collaborative Clients
Generally speaking, clients who are financially invested in a project from the get-go are more likely to contribute to it in a collaborative way. This is great for contracts where you need a lot of input or back and forth from a client to get the job done.
Deposits encourage clients to be more involved and to keep the project moving along at a steady pace. This makes it easier to keep the work on track and within scope.
When to Ask for a Freelance Deposit
It’s tempting to ask all of your clients for upfront payment, but realistically, it’s not always appropriate. In general, you should be asking for an upfront payment in the following circumstances:
When Working With New Clients
It’s good practice to ask for a deposit from new clients who you’re working with for the first time. Since you don’t have an existing working relationship, a deposit helps to uphold and enforce your contract.
Once you develop a rapport and build trust with each other, a deposit will no longer be necessary, as you will be able to rely on the client to make payments in full and on time.
For Longer and Larger Projects
If you’re signing on to a new project with a distant deadline, asking for a deposit will provide you with some income to keep you going in the meantime so that you aren’t left strapped for cash.
The same goes for large projects. If you’re working on something with a big price tag, it’s fine to ask for at least partial payment upfront instead of the full amount in your final invoice.
In these circumstances, asking for deposits benefits you by keeping your bank account topped up and ensuring that your clients are committed.
When There Are Project-Related Costs
Some freelance work comes with project-r
Quite interesting information and links can be found on this complete post.
For the Full Article –
Please Continue Reading Here: Freelance Security Deposits – Should You Ask Clients for Upfront Payment?