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Consulting and freelance deposits

Andréa Coutu

Consulting fees

2007-08-08 00:00:39

Setting your consulting fees is one thing, but do you ask clients to make a deposit when they hire you? Asking for a deposit poses several benefits.

Benefits of a deposit

  • May help provide legal proof that you've entered a contract -- money or "consideration" has changed hands
  • Reminds the client that they've entered a binding contract
  • Scares off some people who had no intention of ever paying you
  • Ensures you'll receive at least something, if the client disappears without paying
  • Improves your cash flow situation, so you can pay your bills while you're doing the work
  • Protects you if a client decides to cancel the contract before you start -- when you've already turned away other paying work
  • Reduces the amount of credit you're extending to the client
  • Allows the client to spread payments over a period of time
  • Provides some money for you to pay subcontractors and third parties
Professionals expect deposits from their clients. Don't be embarrassed to ask for money upfront.

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Comments

I definitely agree with requiring a deposit for new customers. If they flake and refuse to pay the balance, at least you will have your deposit. I make exceptions for repeat clients and well-known organizations with a good reputation for paying.

— Laura

A great point is that transfer of payment equates to a confirmed contractual agreement. I also agree with giving existing clients and some large corporations a "pass" on the deposit too. Great post!

— Tony

In Spain it is normal to ask for 40% in the beginning and 60% when you hand in the report or project. Sometimes a rule like this 30%(beginning)+30%(darft)+40%(end) is applied

— xm carreira