Deposits

There are lots of reasons for freelancers to take deposits:

• They help cashflow and keep financially afloat during a project
• They reduce freelancer’s exposure to unscrupulous client behaviour (e.g. a client disappearing at the end of a project without paying a penny)
• Indicates that a client is serious enough about a project to financially commit

One of the most common structures is to take a non-returnable 50% commencement deposit, followed by the remainder when the project is complete.

Two notes on this:

1. The initial deposit is is non-returnable because you’re setting the time aside to work on their project. If they cancel, you lose the work and any other work you may have turned down.
2. Where possible, it’s advisable to make the second payment when the work is complete but before the files are handed over to the client. In many cases, that speeds up the release of the final payment with the side benefit of making sure you receive it.
   

Alternative payment structures #

I used to charge along this basis, but there are a couple of downsides:

1. Once you start, you’re still exposed to 50% of the payment. The closer to completion you get, the more exposed you are.
2. Clients might drag their heels over edits or other elements mid-project. That might mean the end payment is significantly delayed, or the project may never be completed.

After experiencing both of these on more than one occasion, I switched to a three-part payment:

• 50% non-returnable commencement deposit
• 40% mid-way payment: due after design signoff/development kickoff, or after 30 days – whichever comes sooner
• 10% final balance: due when the project is complete, before the project goes live

Your mileage may vary, but this had an immediate and significantly positive impact on my business.

There’s no real reason for clients to reject this structure. As I wrote previously:

It may seem scary, unjustifiable even, to hold 90% of the project fee when you’ve only completed 50% of the work. However, as the project progresses, that percentage of completed work is only increasing.

Assuming you have a contract in place, the biggest leap of faith for the client is the initial 50% deposit, which has already been paid. They’re now paying upfront for each stage of work.

Other scenarios #

Smaller projects #

It may not make sense to split payment for smaller projects (e.g. under £500) or those that will be completed in a short amount of time (e.g. one week).

In those cases, lots of freelancers charge the full fee upfront. The justification is the same as the non-returnable commencement deposit: you’re setting the time aside to work for them.

Hourly projects #

For freelancers working on an hourly basis, it’s common to charge in arrears (after the work is complete). That places most risk on the freelancer, but charging hourly doesn’t mean a deposit is out of the question.

For instance, it’s not uncommon to offer a range of hours for a project. In these cases, it might be reasonable to charge a percentage of this lower limit (e.g. 50%) as the deposit.