What stages to prescribe in the contract

    In previous notes and comments to them, I recommended breaking down the work with the customer into stages, passing each stage and receiving money for it. Colleagues began to ask what stages can be distinguished when creating a site, and I decided to write more about this.

    Why it is worth passing the work in stages



    Experience in different studios and with different people suggests that the best guarantee of payment is the payment made . An agreement, a letter of guarantee, a signed act or, especially, an oral agreement do not mean that you will be paid on time, if at all. You will need to bring money for the office, communication, meals, pay salaries and taxes, pay for hosting, the work of subcontractors and much more.

    To spoil relations with the customer, especially, to get involved in litigation is the last thing. Long, extremely unpleasant, often unprofitable and almost always unjustified. In most cases, everything can be solved in a civilized and free will of the parties, and once warned is better than constantly treating a chronic disease. quit smoking

    Even very large and serious companies, in which decent and conscientious people work, delay payment for a variety of reasons. For example, the budget for this quarter is over (but they are ready to pay in the next). In fact, a small studio or  agency lends to a large customer .

    But more often it happens that the CFO, with whom you are generally unfamiliar, decides to send money to more priority cases. A small studio will never be a priority for a large company with dozens of representative offices. This is reality. And this is not a reason to spoil relations with good people and a significant client.

    When working with small and medium-sized businesses (and large real estate holding companies sinned this), one heard about the “lack of money in the company” and the “lost accounts in the accounting department” and that “the general account is signed, and he is on a business trip” . But you yourself also have to pay. That is, you credit the customer at your own expense . If he took this money from the bank, he would have paid interest from them, and so you pay these percentages.

    How it works and why it is profitable



    The division of work into stages is beneficial to both a conscientious contractor and a conscientious customer. Remember this and use in negotiations.

    Stages reduce payments



    Psychologically, it’s easier for many people to agree to three payments of 2,000 euros each than one payment of 6,000 euros.

    When working with large companies it is easier to fit into the balance of the quarterly budget. You can wait for the next quarter, or you can get some of the money now.

    When the customer is a small company, it often happens that they receive some kind of money, but they do not keep this money in the account, and then they let it in somewhere. And when the time comes to pay you, there is no money. When payments are divided into stages, it is easier to fit into another such arrival of money.

    Stages are milestones



    Not only the customer must control the progress of the project, but the contractor must control the payments.

    The customer can legitimately ask where the layouts are, because the deadline specified in the contract is nearing the end of the corresponding stage. The contractor will be in good shape, knowing that he will not be able to postpone everything until the last week. When the work is divided into stages, the probability of failure to meet deadlines is reduced.

    And, again, purely psychologically, the customer is calmer: he  really keeps his finger on the pulse and has the ability to track the real progress of the work.

    The contractor can hand over the mock-ups, get the signed act and demand payment within the time period set by the parties and prescribed in the contract. If the customer delays payment in an interim period, then with a correctly drawn up contract, the contractor will receive instruments of influence : he will have the right to move the deadlines and demand a fine.

    The monetary argument (interest) is quite tough. Leave it as a last resort. At the very extreme. Save it for bookkeeping or CFO. For example, when an accountant says “oh, the bill is lost” or “we are about to pay”, he can be hinted that the contract has expired, there is no money, and the contract provides for sanctions. Accountants and financiers perceive the money argument the fastest, but do not rush to express it to the main contact person.

    By the way, in the Made studio I have not used this argument yet, although we once paid a penalty to the customer, and we reminded ourselves of them. The deadline was disrupted with the participation of both parties, but I did not start the proceedings, who is more to blame. Just when they asked me how much they owe us, I named the amount, calculated the penalties and invoiced with the corresponding deduction.

    For the person interested in the completion of the project, the argument with the deadlines is more effective and less rigid. Talking about timelines, unlike sanctions, does not cause offense. If the manager on the part of the customer feels that the delay was due to his fault (he didn’t give the bill to the accounting department, went to the sushi bar instead of agreeing on the layout with the boss in the evening), then he understands that with the official shift of the dates the jamb will pop up, the authorities will see.

    In addition, the customer has his own deadlines, to which he treats with more respect than your deadlines. Here is a legal shift in deadlines - this is a good, civilized instrument of influence that allows you to link the interests of the customer with yours.

    If there are no jambs on the part of the customer’s manager, then he will go to the boss himself and intelligibly explain why it is worthwhile to responsibly fulfill his obligations under the contract.

    Stages are fixation points



    He did the job, passed the result, received payment. This is insurance for both you and the customer. Whether the meteorite fell on the studio, whether lightning struck the customer, if his werewolves robbed in uniform or found a creative crisis on the designer, a certain stage of the relationship was fixed.

    The customer received his layouts, templates, terms of reference, and the contractor received money and closing documents.

    If suddenly it comes to the termination of the contract (the reasons are very different, for example, the founder of the customer decided to close the corresponding line of business), then the work on the stages will seriously help you out.

    Firstly, you will already receive money for the previous stages. The volume of completed but unpaid work is reduced.

    Secondly, when the contract is terminated (even if you write about the services, the court can still classify the creation of the site as contract work), then the customer must pay the cost of the work actually performed . The contractor needs to show what work was actually performed, and justify that these work really took fifty percent of the contract value, and not five, as the opponent wants to imagine.

    When stages are highlighted, their cost is indicated in the contract and there are acts confirming that the result of the stage was accepted by the customer, then everything becomes much simpler.

    You get money earlier


    It’s more profitable to get some of the money earlier. A sane person will not agree to give 100% prepayment. Typically, an advance payment of 30-40%. The remaining 60-70% will have to wait a long time.

    With a staged payment, you have the opportunity to take an advance payment, and then hand over the work in parts, gradually receiving the following money. And you can put this money into current expenses: salaries, rent, payment to illustrators.

    Step Examples



    We try to ensure that the terms of reference are paid separately. Moreover, a separate contract should be concluded for the preparation of technical specifications. Alas, it is not always possible to convince the customer to work on such a scheme. Nevertheless, I consider a separate contract for the design of the site to be the correct, civilized scheme of work. Why - I'll tell you later.

    The exception is small sites with an established process, mutual understanding with the customer and full mutual trust.

    If the project is small, then we highlight the design as an intermediate stage. The customer receives a full set of layouts and comments for technologists.

    If the project involves a complex layout, writing non-trivial scripts, then this process is also worth highlighting in the stage. The customer receives a complete set of templates, scripts and related files. Everything is tested in different browsers and is accompanied by comments.

    If the project is complex, lengthy, then an individual scheme for dividing into stages should be developed, guided by certain principles .

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