Contracts – setting payment schedules

For freelancers, one of the most annoying parts of the job is getting clients to pay. A good way to reduce the pain so that everyone knows what they’re doing is to set the expectation of when payments are expected. Let’s start by looking at some of the payment options.
1. Pay on delivery
This one’s simple – you supply the work and at the point when you handover the complete task, the client has a certain period of time during which they’re expected to render payment.

2. Payment schedule
Again – there’s no rocket science here. You agree with your client a schedule – usually aligned with some delivery milestones. It’s important to let the client know that they don’t receive the next part of the work until they;ve paid for the previous one.
3. Payment based on some other event

In the publishing world, a common payment schedule is to pay when the work is published. In some publishing circles this is very common.
Which option is best?
The best option will depend on your cashflow, your ability to negotiate favourable terms with the client, the client’s desire to negotiate and the nature of the work.
Some tasks are better suited to particular payment terms than others. For example, if you’re writing a book you might ask for a portion of the payment to be paid upon signing the contract, with some milestone payments as particular drafts are delivered with the final amount paid when the project is completely delivered.
If you’re writing an article for a magazine, then a single payment is probably all that’s needed. Then, the only thing you need is an agreement on when the payment is to be made. Then you may be able to negotiate to be paid within x days of delivery or at some other agreed point in time.
What if you can’t negotiate?
Many freelancers feel that they aren’t in a position to negotiate. That’s never the case. Ultimately, if a client is looking to screw you down on the rate and payment terms then it’s OK to say that you can’t take that job, be polite about why you’re refusing the work and walk away. You might feel that you’re letting money slide through your fingers but there’s no point working if you’re not ging to be paid fairly and punctually.
You can always negotiate.
Some options for your contract
Ok, having considered some of the dimensions and issues of a payment schedule, let’s look at some typical words you might see in a contract.
These are words from contracts I’ve signed or used for guidance.
Disclaimer – Please note that I am not a lawyer. These are provided for information only. You should get independent legal advice before using any of this or signing legal documents.
Monthly or other regular payments
This form of words can be used when you do a piece of regular work. For example, you may work for a client who asks you to complete a set task each month.

Invoices will become due and payable in accordance with the terms, on receipt by the <client name> of :
(a)          time sheets authorised by the <client name>,
(b)          a valid invoice.
Payment terms to reflect <The Client> and <The client>  payment terms. Unless otherwise specified, invoices will be rendered on a monthly basis with payment due within <number of days> days of acceptance. Where applicable, each tax invoice will be accompanied by a time-sheet.
The payment period will be monthly in arrears, commencing from the Commencement Date of this agreement.
Payment will be by direct credit into a <your company name> nominated bank account.

For a milestone based-payment system, you’ll need to create a schedule that both parties agree to. Something like this might work.

The agreed works are to be delivered in agreement between <the client company> and <your company>. The payment terms shall be <agreed number of days from when services are delivered >days.
Delivery shall be in accordance with the agreed delivery schedule that has been provided by <your company> as part of the quotation for works. Delivery will be based on five stages with payment rendered at the delivery of each stage.
Stage 1 on <date> – 10% of total fee
Stage 2 on <date> – 15% of total fee
Stage 3 on <date> – 15% of total fee
Stage 4 on <date> – 30% of total fee
Stage 5 on <date> (completion) – 30% of total fee

Keeping it simple
If you prefer to keep things simple, it worth writing the payment terms into an email. For example you could write something like

Payment will be made within 30 days of receipt of the invoice


Payment will be made 14 days after publication of the work

While such an approach might seem a little crude, at the very least it sets an expectation and makes some kind of obligation on the client. Then you can put the payment date on your invoice. If there’s any dispute, you’ve got a paper trail to follow.
So, hopefully, that’s enough to get you started and thinking about how you might define payment terms.
Is there any other advice you can suggest about payment terms for freelance contracts? Let me know in the comments.