Freelance In 40 Days [Day 16]: A Document That Will Save Your Ass

Posted: September 23rd, 2009

Photo by Jk5854 (Flickr)

Photo by Jk5854 (Flickr)

This is Day 16 of the Freelance in 40 Days series where you’ll learn to freelance just by taking it one day and one task at a time. Today you’ll be introduced to project agreements and using them with your clients.

The Project Agreement

New freelancers often believe that working in freelance is finding projects, doing them and collecting a payment shortly after. One critical step is often missed, however, that is important before even starting any project: drafting a project agreement and have your client sign and return it.

Why is it important? Here are a few reasons:

  • It outlines in detail exactly what you will do on a project so the project scope is well defined.
  • It sets a deadline (or milestones) for completion on your part and payment on the client’s part.
  • It keeps you and your client on the same page as far as expectations are concerned
  • You will have a case if a client demands additional work without compensation.

A project agreement does not have to be a perfectly legal document drafted by a lawyer either (we’ll get to why later). It’s main purpose is to align you and your client on the scope of a project so you know exactly what you are to do and the client knows exactly what he will receive.

To create your own project agreement for your freelance business, here are a few resources to get started:

The best method is to look at multiple sample contracts and adapt them into one that suits your business the best. Remeber that not all project agreements will be the same for all freelancers.

The Legality of Project Agreements

Since much of the freelance work done is over the internet, an issue arises when freelancers are working with clients from other states or countries. In the event a dispute arises across borders, does a project agreement document hold a client legally accountable to any funds owed to you? How do you enforce it?

The truth is,  unless you know a collector who lives locally to that client, you’re shit out of luck. There may be some legal avenues you can take but any legal fees, plus the time it takes away from your work, are not likely to make it worth pursuing. Does this mean working over the internet becomes a risky business?

It may surprise you but, no, it doesn’t have to be. There are ways you can protect yourself and even prevent disputes from happening in the first place.

The first is always require an up-front deposit before starting any project. It is common to ask for between 30% and 50% of the project fee before starting and, if your client is serious about the project, it will be paid unconditionally.

Those that decide not to pay an up-front fee or would rather pay upon completion should be a red flag to you. This is a sign that they could stiff you in the end (though not in all cases). Still, you never want to put yourself in a position where a rogue client can take your work and run, not paying a cent.

A second option to protect yourself is to utilize an escrow service. An escrow service is a third party company that holds the project fee paid by the client then releases those funds to you when the project is completed. This could be offered as a second option for clients not wishing to pay the up-front deposit.

The third option is to utilize a major paid job board to search for projects. Within their systems, they provide project agreements you can give to clients on projects you win. Plus, they have measures to virtually guarantee payment upon completed work including escrow services.

Some of the most reliable major job boards are Elance, Guru and Odesk.

Disputes

In the event a dispute does happen, the most important thing you can do is try everything you can to diffuse it. Disputes most commonly happen due to misunderstandings in your agreement with the client, where they wanted X and received Y.

Unfortunately misunderstandings do happen on occasion. Sometimes they are your fault and sometimes the fault of the client.  If the client is at fault, it will tend to smooth out matters if you give in a little and sacrifice a little extra time on a project. Taking a hard stance is more likely to result in a hard stance by the client (i.e. no payment).

Of course, if you are at fault for a dispute, do whatever is necessary to make the client happy again.

Your Homework For Today

Using the resources above, draft a project agreement you can use with your freelance business. Then remember to give it to each client and have him return it signed before starting any project.

More on the author, Johnny Spence
Johnny is the founder of The Freelance Rant and a freelance web programmer with 8 years in the business. Have a visit at his company Oscarrr!web or see what he's up to on Twitter.

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