Freelance and Finance: 5 Ways to Settle Between a Customer and a Freelancer
Payment. The issue of mutual settlements for freelance is acute, each side wants to protect itself, because the risks are great. The customer runs the risk of losing money, the freelancer runs the risk of losing time to work and, in fact, also losing money.
How are things going with pay in general in these your freelancers, how does it work?
There are several typical schemes, each of which has its own characteristics.
- Prepayment. Essentially an advance. The customer transfers the money in whole or in part even before the start of cooperation
- Postpay. Payment is made only after completion of work.
- Phased payment. They completed part of the work, the customer accepted it - transferred the money.
- A separate item is the payment under the contract.
- Escrow services that are somehow presented on exchanges. We call it Secure Payments.
A lot of freelancers, especially experienced ones, work only on a prepaid basis. The percentage varies depending on the size of the order, customer reputation and so on. Usually they take 30-50% of the order amount, and on small orders they often ask for all 100%, although some, on the contrary, carry out small orders without any prepayment at all.
Why do they do it? Prepayment to some extent insures the freelancer. If the customer has made an advance payment, he will not drop the order, he will not be able to leave without paying anything at all, and so on.
Customers in this situation are not in the best position, in a sense. The problem is that at the stage of discussing the project and payment, few people discuss in detail what will happen if it does not work as intended. How will events develop in case of problems? In what cases will the contractor refund the prepayment and will it be refunded at all? Because of this, directly problems in the work are exacerbated by payment - the customer demands that the advance payment be returned, the contractor refuses.
On the other hand, the customer is interested in making the prepayment to the contractor. This is motivation, and some performers seriously believe that until he took the money, he had no obligations to the customer at all. For two weeks I poked around, did nothing, spat and left. Sincerely surprised by the negative reviews in such cases.
It is the customers who are most often the victims of scammers who take an advance payment and do nothing at all. Moreover, the fraudster can collect quite a lot of prepayments and before exposing for a long time to feed the customer breakfast or even show some kind of activity.
Performers resort to a variety of techniques that are not always convenient for the customer, so that he does not get a result suitable for use until full payment. Programmers do work on their server, designers show pictures, but don’t give mock-ups, logos make copious examples of watermarking, working with videos send examples in low quality and with watermarks, send texts with screenshots and so on. All this can interfere with the full assessment of the results of the work.
For the performer, too, everything is not too rosy, except for the case of a 100% prepayment. Despite the prepayment and, as it were, tying the customer with this prepayment, he may not pay the rest. Just drop the order for various reasons. Either this is an intermediary and his customer abandoned the project, or he is the customer himself and abandoned the project and minimizes losses.
It may also be that the customer had the prepayment money, but not the full payment. Somewhere miscalculated, circumstances changed and so on. Not all customers in this case seriously consider that they are bound by obligations.
Moreover, the fakap can happen after any period of cooperation. You can work with a person for two years, and then not get a surcharge. Or do not take an advance payment at all. We have been working for a long time!
The insurance comes within the size of the prepayment, and the contractor can already complete the work. Not so painful as not getting anything at all, but not guaranteeing full payment.
Prepayment for a freelancer:
+ Insurance in the amount of prepayment
+ "Binding" of the customer. The customer is more motivated to complete the project
- Total insurance in the amount of an advance payment
- Not every customer is ready to give an advance payment
Prepayment for the customer:
+ Freelancer is more motivated
- Money can be lost, even if you do not like the examples
- Higher probability of encountering fraud
- Insuring yourself with watermarks and working on my side, the freelancer makes it difficult to evaluate the results of work
Is it worth it to prepay? Looking to whom.
Customers, of course, would be happy to pay only after the work is completed in full. In general, this is a natural desire, because to pay for something that you have not yet seen is quite dangerous and completely uncomfortable. As described in the paragraph on prepayment, with postpay the motivation of the contractor can be much lower and the order can be disrupted just because the contractor does not consider himself obligated until he sees the money.
Performers themselves risk not getting paid for their work. Usually scammers are interested in getting live money, not work. It’s more difficult to use the results of a freelancer’s work, but unscrupulous intermediaries or simply changing their minds are not uncommon. Well, the discrepancy of tastes, misunderstanding and other communication problems has not been canceled.
Also, everything related to the demonstration of work with copy protection is valid, and even more so than in the case of prepayment, because the performer risks even more. As if behind watermarks, work was visible.
Postpay for freelancer:
+ The customer would rather agree to give the order to you
- There is a risk of not getting paid at all
- you are without payment all the time the order is being completed
Postpay for the customer:
+ You will not lose money
- The freelancer is less motivated and can leave
- It is more difficult to find an artist who agrees to such a scheme of work
Phased or installment payment is not a type of loan, in this case.
The work is divided into stages, each stage is evaluated and after the work is completed and acceptance by the customer is paid.
It seems to be an ideal circuit, right? The customer sees that the work is being done and pays only for what has already been done, the contractor risks only paying for a small stage.
If the stages are weakly connected with each other, then all this differs little from working with a prepayment or with a postpay, depending on how the payment is made.
If the stages are closely related to each other, for example, these are parts of the application, design page or chapter of the book, then nuances appear for the customer. With phased execution, the contractor can absolutely safely refuse to work after any stage. Midway through or 20% before graduation. Each stage is perceived as a separate order and the refusal of further work is not perceived by the contractor as unfair behavior in general.
Was the work done? It was. Was the money paid? Wonderful. That is, psychologically it is easier for the contractor to refuse to work in the process, it will be difficult for the customer to demand the return of the payment already made.
At the same time, the customer is left with unfinished work that cannot be used, and bringing it to the end can cost almost more than the original cost of the order. He had already paid half, half had already received, but finding an artist to complete the rest is difficult, and it can be so expensive that it is simply not rational to do this.
Phased payment for a freelancer:
+ Small stages, less risk of being left without a large amount of money
- Depends on the type of payment for the stage, but the risks are less than when paying for the whole work
- You need to evaluate each stage, this is additional labor
Phased payment for the customer:
+ It’s easier to negotiate with a freelancer
+ Payment is gradual, you don’t have to lay out a large amount of money before starting work
- With a lot of stages connected, you can pay a lot of money and not get the result
- Freelancer is less motivated to finish the job
Some have high hopes for cooperation with the conclusion of the contract. Here it is written on paper, signatures, stamps, which means it must!
I have to, but it’s expensive and long to get things done in the courts, in most cases for freelance orders it will be simply irrational because of the amounts. Costs will be disproportionate to gain.
Also, the counterparty can simply go bankrupt (it coincided) and then even the court will not help. A bankruptcy scheme is regularly met by hiring builders, for example.
Well, a separate joy is working with a counterparty from another country. This is freelance , there are no boundaries. And often the point is just to hire an artist from the region with lower salaries.
Contract for a freelancer:
+ It’s easier to work with serious guys
+ The ability to defend one’s interests in court
- The ability to defend one’s interests only in court with all the associated deadlines and costs
- Against serious guys
- Work with foreign countries
Contract for the customer:
+ The Contractor can be brought to justice
+ It is possible to pay officially
- The Contractor is irrationally held accountable
- You can only pay officially
- Work with foreign countries
Escrow services or secure payments
The principle of operation is quite simple. Before starting work, the customer pays money to the guarantor's account, the contractor sees that the money has been paid. After that, each of the parties can only transfer money to the counterparty, but not take it on their own. Money is frozen and neither side can take it.
The customer can transfer money to the contractor, the contractor can transfer money to the customer.
In the event of conflicts, the Arbitration Tribunal enters the case, which considers the conflict and decides what to do with the money.
The contractor sees that the customer has money, that he is serious. Here it is, the whole amount, there is nothing left - to complete the order.
It is psychologically easier to refuse an order than in the case of an advance payment, when you already took the money, but more difficult than in the case of a post-payment.
Before the start of cooperation, the customer needs to have the full amount on hand and all this money will have to be frozen for the duration of the order. Care should be taken when choosing a site; not all yogurts are equally useful.
It should also be borne in mind that this is in any case somewhat more expensive than direct payment due to various fees. Until the moment you have not lost your prepayment, of course.
The contractor will receive money only at the very end. If the project is long, then it can be uncomfortable for a number of performers. Some performers spend a prepayment even before work begins.
Risks for both parties are a quality of arbitration. On some resources, arbitration can be unpredictable. Either at their discretion, if the arbitrators are not lawyers, or if the arbitrators are still lawyers, but the parties did not know all the subtleties and relied on "maybe" or acted on a hunch.
It is useful to correspond with the text, or at least fix the main provisions with the text. In principle, this applies to any cooperation scheme, but is effective only in the case of escrow.
In general, escrow services are perhaps the only way to get financial guarantees for both parties and help in resolving the conflict, if any. Of course, the customer would prefer postpay, and the contractor full prepayment, there is no doubt about it. But no one will help in the resolution of the conflict.
Secure payments for a freelancer:
+ If the work is done, then the payment will be in full
+ The customer is motivated to assist and cooperate
+ There is no need for additional tricks in the form of watermarks
- Payment will be only at the very end
Secure payments for the customer:
+ The contractor sees all the money before the start of cooperation, is motivated to complete the work
+ If the contractor does not complete the work - the payment will be returned in full
- The whole amount will have to be frozen
- The arbitration will take time and in case of problems it will return the money, but not the time