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July 12, 2022

Payment Terms Every Contract Needs If You Want to Get Paid

payment terms for contract

You did the work, you get paid.

… right? If you’re a freelancer who’s ever been ghosted on a payment or a creative biz owner who knows the pain of waiting 45 days to get paid, this blog is for you. We’re about to show you what to include in your contract to make sure you get paid — and how to reverse course when a client doesn’t pay you on time (or at all).

Payment terms to include in a contract

When written correctly, a client contract will not only protect you and your business, but it actually has the potential to make you more money. Presenting the contract will not only make you feel secure in your offers but also establish the professionalism of your working relationship. Of course, “just any contract” won’t do — you don’t want to  Frankenstein together random contracts from the internet.

Instead, there are some “must-haves” to include in your contracts to make sure they’re legally sound  and  designed to get you paid. 

Non-refundable deposits

Having a non-refundable deposit written into your contract is essential, especially for service-based businesses and creatives who are pouring a lot of time into their pre-work. Some people write a percentage of the total into their contracts — i.e.  photographers  who require 25% of the total bill as a deposit. Others have milestones — i.e. $500 due upon booking, $500 one week before project start, etc. Others have payment plans — i.e. half of the project fee due as deposit, half due upon delivery. Your terms are up to you, but make sure you write your pay schedule clearly into your contract.

Retainers 

If you operate on a  retainer,  you’ll want an agreement that promises payment for a certain amount of time. This could mean that you charge an $1,800 retainer a month for your OBM services and that retainer is billed again on the 1st of the month. You may work like a lawyer and have an upfront retainer fee — $200 per hour for a 10-hour package, let’s say. Then you bill at the end of the money to “refill” that retainer back up to the 10 hours based on how many you used. However your retainers work, make sure you’re being clear on how and when you get paid.

Prepayment 

This is, well, pretty much exactly what it sounds like: payment delivered in ADVANCE of any product or service being delivered to the client/buyer. All conditions of the prepayment agreement must be met by both parties before work starts or assets are delivered.

Invoice payment terms

Do you want to get paid within 3 days of sending an invoice? Do you work with companies that have a Net-45 or Net-60 schedule? You’ll want to know this beforehand, so you’re not waiting on a payment that won’t come through for another month and a half. Make sure to  state your invoice due dates  clearly in your contract, and have clear consequences for the other company/person if those payment terms aren’t met.

Speaking of consequences…

What to do if payment terms aren’t met

Unfortunately, nobody who runs their own business or freelances has had a 100% perfect track record with clients paying on time. Sometimes, clients get sick or their email “doesn’t work.” Other times, they just ignore invoices until they have enough cash flow to pay.

Instead of letting that payment go as a “lost cause,” here’s what you can do to cover your bootie and your bank account.

Late payments

In your contract, don’t be afraid to add bold, highlighted script that says: WE CHARGE LATE FEES FOR LATE PAYMENTS. Some brands may charge a flat fee and some may charge a percentage. It’s a simple solution to a straightforward request, and it’s clearly laid out so your client can’t argue with it after they’ve signed.

Ceasing services/reinstatement fees 

If your late fees are not enough of a warning, the next step is harsh but necessary. No money = no services. Simple as that. This also includes holding onto any deliverables/assets until payment is completed. And if the client comes back wondering why the work has stopped, explain the lapse in payments and then your requirements to start production again. 

This might be a simple invoice paid in full, or it might be the invoice plus interest, or you might even require a reinstatement of service fee. As long as this is all clearly explained in the contract they signed, you’re well within your rights to demand it.

Collections

We hope you never get to this point, but sending unpaid bills to collections or seeking help from an attorney might be your only option. This is after multiple warnings and lighter consequences, but if a client is truly ghosting you and not paying invoices, this step is one way to get yourself paid. Make sure this portion of your contract is easy to understand and highlighted so nobody can argue against it later.

Cover yourself, cover your finances 

Here at The Contract Shop®, there’s a reason we have contract templates for all kinds of work. If you don’t have a contract, or you’re realizing your current template isn’t protecting your payment, hopefully, these payment terms and clauses will help you get paid with less stress.

And if you want to make sure your contract has been time-tested and fellow biz-owner approved… we have  tons of legal templates  for virtually any type of business or service. The best part? Every template we offer is prepared and peer-reviewed by attorneys and has been tested by hundreds of other people, so you know they work.

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