You already know that you must have a signed contract before you begin work. But what should that contract say?
Since we’re in our Getting Paid series, we’ll discuss four provisions that you must include in your contracts to ensure that you get paid. And one of these provisions will even allow you to engage an attorney without worrying about cost in case you need help collecting from a soon-to-be-former bad client.
These provisions may help with other issues as well, and there are, as you might guess, other contractual provisions that don’t necessarily relate to getting paid. We’ll discuss those in a future article.
For now, here are the four provisions that will ensure that you get paid.
Compensation. Okay, a little obvious, right? But there is more to this provision than just how much you get paid. You also need to include a retainer, late fees and kill fees.
As you know, I’m a proponent of the Replenishing Retainer. Use it, and you will waive bye-bye to your cash flow problems. Don’t use it, and you’ll be chasing clients for your money. It’s that simple.
In addition, your compensation provision must include late fees in case a client fails to pay on time, and “kill fees” if the client cancels the project after you’ve begun work.
A late fee is straightforward. If the client doesn’t pay on time, an additional fee is tacked on to the outstanding amount due.
A kill fee kicks in when a client “kills” a project after you start working on it. You’re entitled to compensation for the time you spent on the “killed” project.
Kill fees should also take into account your opportunity costs. In other words, but for your work on the “killed” project, you could have been working on other projects.
Scope of Work. Your contract must include a description of the specific deliverables you will provide and when. It must also state that the contract does not include any additional work beyond what is described in the contract.
How does this relate to getting paid? A scope of work provision not only ensures that a project won’t balloon out of control. It also ensures that when you present the deliverable you will get paid because that deliverable clearly conforms to the description of the scope of work.
Also, if you work on a flat rate, disputes relating to the scope of work can cause your effective rate — and profit — to deteriorate precipitously. BUT, if you have this provision in your contract, you won’t be forced to do additional work. Plus, if the client wants you to do additional work, then that work needs to be addressed in an additional contract with an additional fee.
Which leads us to…
Entire Agreement/Merger Clause. This is a clause that states that the parties’ entire agreement is contained within the signed contract. This isn’t an obvious “getting paid” provision either. But it’s critical.
With this provision, the entire agreement between the parties is contained within the contract. And the client can’t bring anything else into the contract.
For example, if you deliver the work product, and the client says, “I was expecting ______ based on the discussion we had on (date before you signed the contract),” or if you submit an invoice and the client says, “Wait, we agreed to (a price that isn’t identified in the contract),” you can point to the entire agreement/merger clause. And then you can point to the client’s checkbook and tell them to pay up.
Attorney’s Fees and Costs. Many times, the cost of taking legal action is a barrier to freelancers.
For example, if a client owes you $350.00 and refuses to pay, your legal costs will eat up most, and more likely all, of what the client owes you.
However, this provision will allow you to collect not only the $350.00, but your attorney’s fees and costs if you prevail. So, if a client doesn’t pay, you don’t have to worry about the cost of hiring an attorney, or even the filing fee for a small claims court matter (in which case you may be able to represent yourself).
And, just having this provision in your contracts can deter a client who may think about stiffing you.
So there you have it. Four essential provisions to include in your contracts to ensure that you get paid.
I almost forgot – one more thing. If the client doesn’t want to enter into a contract. Or balks at having any of these provisions in your contract, run away! Fast!