5 Steps To Guarantee Client Payment

If you’ve ever experienced the hassle of late payment, you’ll understand how much it costs. Your cashflow’s affected but you’ll also lose hours chasing clients and it’ll sour your relationship. It doesn’t need to be that way.

1. Use a Contract

If you do nothing else: write a legally binding contract for you and the client to sign. Yes it’s boring, but create a reusable template which is easy to modify. Keep it concise but include:

An outline of the project, the prices and delivery dates
The client’s payment schedule. Highlight fees and interest charges for late payment.
The ownership of all code, media, etc. Ownership should only be transferred following the final payment.
Review and approval terms (see below). Add a clause about “unreasonable rejections” to ensure clients cannot continually change scope or add features.
What happens in the event of a dispute.
How long the contract terms remain valid prior to signing. 28 days is normally enough — it’ll focus the client’s mind and prevent them from delaying the project.

For smaller projects I normally use a short 2/3-page contract which provides links to web pages containing detailed information. It’s less daunting to read but the small print is still available.

While verbal agreements are legally binding, it’s far more difficult to prove what was agreed. Put everything in writing.

2. Demand a Deposit

Always demand an up-front deposit. 50% is realistic for most projects — if not 100% for smaller tasks. For larger projects, consider breaking it into smaller sub-tasks or outline regular payment schedules.

If you’re doing consultancy work which is paid per hour, I’d recommend frequent billing — perhaps every one or two weeks. If in doubt, run a credit check on the company and search the web for negative comments (you may not leave them, but others will).

If the client is concerned, offer money-back guarantees if they’re not completely satisfied with the final delivery. This won’t be a problem if the brief is good and your skills are up-to-scratch. Alternatively, consider using an escrow service.

Alarm bells should start ringing if the client starts to quibble about tight budgets. If they’re moaning now, think how bad they’ll be when the payment’s due. It’s not your problem. Never negotiate on price — remove features or extend the schedule if they want a reduction.

Finally, never work for share options or a slice of profits unless you’re a company director with absolute faith in the product. For every Facebook billionaire, there are thousands of developers who never saw a penny.

3. Contact the Right People

Find out who invoices should be addressed to. Ideally, speak to the person responsible for payments before you start working for the company. They may require information before they can add you to their accounting system.

At the very least, it’ll give you a valuable contact within the company’s finance department should anything go wrong.

4. Use a “Work Acceptance” Document

A Work Acceptance document is delivered with the completed project and must be mentioned in your contract. The client should be given a reasonable amount of time to evaluate, verify and accept your work by signing.

Offer a sweetener for those who sign on time, such as a 30-day warranty period where further issues are rectified at no extra cost. If the client fails to sign or report issues before the deadline, the project will be deemed complete; no warranty will be available and updates will incur further charges.

5. Withhold Launch Until the Final Payment

Unlike other industries, it’s relatively easy for web developers to withhold software or media until the final payment. Just remember that it’s not always practical — a client cannot evaluate a website unless they can see and use it. However, you should be able to withhold something; whether it’s transfer to their domain, ownership rights, email accounts, FTP access or image files.

Finally, did I mention you should have a contract which outlines all these policies? Spend a day or two writing one. It’s worth it.

Do you have any tips for ensuring payment?

Frequently Asked Questions (FAQs) about Guaranteeing Client Payments

What are the best practices to ensure client payment?

To ensure client payment, it’s crucial to have a clear and comprehensive contract that outlines the scope of work, payment terms, and consequences of late payment. Regular communication with the client about the project’s progress and invoicing can also help. Additionally, consider using a payment system that allows for upfront payment or deposit, and always issue invoices promptly.

How can I protect myself from non-paying clients?

Protecting yourself from non-paying clients starts with a solid contract that includes a clause about late or non-payment. You can also request a deposit or partial payment upfront. If a client is consistently late with payments, consider stopping work until payment is received.

What is a payment guarantee?

A payment guarantee is a promise by a bank or financial institution to make a payment to a seller if the buyer fails to fulfill their payment obligations. It serves as a safety net for sellers, ensuring they get paid even if the buyer defaults.

How does a letter of guarantee work?

A letter of guarantee is a document issued by a bank on behalf of a buyer, promising to cover the seller’s loss if the buyer fails to pay or meet the terms of the contract. It’s often used in international trade to reduce risk for the seller.

What is a guaranteed payment to a partner?

In a partnership, a guaranteed payment is a payment made to a partner for services or capital provided. It’s not dependent on the partnership’s income and is often used as a way to compensate a partner for specific services beyond their share of the partnership’s profits.

How can I negotiate better payment terms with my clients?

Negotiating better payment terms starts with understanding your client’s payment cycle and proposing terms that align with it. Be clear about your payment expectations from the start and consider offering incentives for early payment or imposing penalties for late payment.

What can I do if a client refuses to pay?

If a client refuses to pay, you can send a formal demand letter outlining the amount owed and the terms of the contract. If they still refuse to pay, you may need to consider legal action or hiring a collection agency.

How can I prevent late payments from clients?

Preventing late payments can be achieved by setting clear payment terms, sending invoices promptly, and following up on overdue payments. Offering multiple payment options and sending reminders before the payment due date can also help.

What is the role of a bank in a payment guarantee?

In a payment guarantee, the bank acts as a guarantor, promising to cover the payment if the buyer fails to pay. This reduces the risk for the seller and can facilitate business transactions.

How can I ensure I get paid for my services in a partnership?

In a partnership, you can ensure you get paid for your services by setting up guaranteed payments. These are payments made to a partner for services or capital provided, regardless of the partnership’s income.