Freelance and Finance: 5 ways of calculation between the customer and the freelancer

Payment. The issue of settlements for freelancing is acute, each of the parties wants to protect themselves, because the risks are great. The customer runs the risk of losing money, the freelancer runs the risk of losing time to work and, in fact, losing money too.

How are things at all in your freelancing work pay, how does it work?

There are several typical schemes, each of which has its own characteristics.
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• Prepay. Essentially an advance. The customer transfers money in whole or in part before the start of cooperation.
• Postpay. Payment is made only after completion of work.
• Phased payment. We did some of the work, the customer accepted it and transferred the money.
• A separate item will highlight the payment under the contract.
• Escrow-services that are somehow represented on the stock exchanges. We call it Secure Payments.

Prepayment

A lot of freelancers, especially experienced work only on a prepaid basis. The percentage varies depending on the size of the order, the reputation of the customer and so on. Usually they take 30-50% of the order amount, and on small orders they often ask for 100%, although some, on the contrary, do small orders without any prepayment.

Why are they doing that? Prepaid to some extent insures freelancer. If the customer has made an advance payment, he will not give up the order, he will not be able to leave without paying anything at all, and so on.

Customers in this situation are not in the best position, in a sense. The problem is that at the stage of discussing the project and payment, few people discuss in detail what will happen if it is not the way it was thought. How events will develop in case of problems? In what cases the contractor will return the prepayment and return it at all? Because of this, problems directly in the work are exacerbated by the payment - the customer demands to return the prepayment, the contractor refuses.

On the other hand, the customer is interested in providing the advance payment to the contractor. This is a motivation, and some performers seriously believe that as long as he does not take the money, he has no obligations to the customer at all. I spent two weeks picking, did nothing, spat and left. Genuinely surprised by the negative reviews in such cases.

It is the customers most often the victims of fraudsters who take an advance payment and do nothing at all. Moreover, a scammer can collect a lot of prepayments and, before exposing, for a long time, feed the customer with breakfast or even show some kind of activity.

Artists resort to a variety of techniques that are not always convenient for the customer, so that he does not get a result that can be used until full payment. Programmers do the work on their server, the designers show pictures, but they don’t give mockups, the log-makers generously cover examples with watermarks, working with videos send examples in low quality and with watermarks, texts are sent with screenshots and so on. All this may prevent a full assessment of the results of work.

For the performer, everything is not too bright, except in the case of a 100% prepayment. Despite the prepayment and, as it were, binding the customer with this prepayment - he may not pay the rest. Just quit order for various reasons. Whether it is the intermediary and his customer refused the project, or he the customer himself and refused the project and minimizes losses.
It may also be that the customer had money for prepayment, but not for full payment. I miscalculated somewhere, circumstances have changed, and so on. Not all customers in this case seriously consider that they are bound by obligations.

And fakap can happen after any period of cooperation. You can work with a person for two years, and then not receive a surcharge. Or do not take a prepayment at all. We have been working for a long time!
Insurance is within the amount of the prepayment, and the contractor can do the work entirely. Not as painful as not getting nothing at all, but not a guarantee of full payment.

Freelancer prepay:

+ Insurance in the amount of prepayment
+ “Tying” of the customer. The customer is more motivated to complete the project.

- Insurance total prepayment
- Not every customer is ready to pay in advance

Prepay for customer:

+ Freelancer more motivated

- You can lose money, even if you do not like examples
- Higher chance of fraud
- By insuring yourself with watermarks and working on your side, the freelancer makes it difficult to evaluate the results of your work.

Should I give an advance payment? Watching who.

Postpay

Customers, of course, would be happy to pay only after the work has been completed in full. In general, this is a natural desire, because to pay for something you have not seen is dangerous enough and completely uncomfortable. As it was described in the paragraph about prepayment - when postpaying, the contractor’s motivation may be much lower and the order may be broken simply because the contractor does not consider himself obliged until he has seen the money.

The performers themselves risk not getting paid for their work. Usually fraudsters are interested in receiving live money, not work. Freelancer results are harder to use, but unscrupulous intermediaries or simply changing their minds of customers are not uncommon. Well, the discrepancy between tastes, misunderstanding and other problems with communications has not been canceled.

Also in force is all concerning the demonstration of work with copy protection, even more so than in the case of prepayment, because the performer risks even more. As if the watermarks were visible work.

Postpay for freelancer:

+ The customer is more likely to agree to give the order to you.

- There is a risk not to receive payment at all
- You are without payment all the lead time

Postpay for customer:

+ You will not lose money

- Freelancer less motivated and can leave
- It is more difficult to find a performer who agrees to such a scheme of work.

Phased payment

Phased payment or payment in parts is not a type of credit, in this case.
The work is divided into stages, each stage is evaluated and after the work is completed and accepted by the customer, it is paid.

It seems to be the perfect scheme, right? The customer sees that the work is done and pays only for what has already been done, the performer risks only payment for a small stage.

If the stages are connected with each other weakly, then all this differs little from work with prepay or postpay, depending on how the payment is made.

If the stages are strongly connected with each other, for example, these are parts of the application, design pages or chapters of a book, then there are nuances for the customer. With a phased implementation of the performer can safely refuse to work after any stage. In the middle of execution or 20% before the end. Each stage is perceived as a separate order and the refusal of further work is not perceived by the performer as unfair behavior in general.

Was the job done? Was. Was the money paid? Wonderful. That is, it is easier for the contractor to psychologically refuse to work in the process, it will be difficult for the customer to demand a refund of the payment already made.

In this case, the customer remains with unfinished work, which is impossible to use, and bringing it to the end can cost almost more than the original cost of the order. He has already paid half, he has already received half, but it is difficult to find a performer to do the rest, and it can be so expensive that it is simply not rational to do it.

Phased payment for freelancer:

+ Small stages, less risk of being left without a large amount of money

- Depends on the type of payment stage, but the risks are less than when paying for the entire work entirely
- Evaluate the need for each stage, it is an extra effort

Phased payment for the customer:

+ Freelancer easier to negotiate
+ Payment occurs gradually, it is not necessary to post a large amount of money before starting work.

- If the stages are very connected, you can pay a lot of money and not get a result
- freelancer less motivated to complete the work

Contract

Some have high hopes for cooperation with the conclusion of the contract. Here on paper is written, signatures, stamps, it means it should!

It should, but it is expensive and time consuming in courts, in most cases for freelancing orders it will be simply irrational because of the amounts. Costs will be disproportionate to the gain.
Also, the counterparty may simply go bankrupt (as it coincided) and then even the court will not help. A bankruptcy scheme is regularly met by hiring builders, for example.

Well, a separate joy is working with a counterparty from another country. This is freelance, there are no limits. And often the point is just to hire an artist from a region with lower salaries.

Contract for freelancer:

+ Easier to work with serious guys
+ Ability to defend their interests in court

- Ability to defend their interests only in court with all the attendant terms and costs
- also against serious guys
- Work with foreign countries

Contract for the customer:

+ Artist can be held accountable
+ You can pay officially

- Contractor is not rational to prosecute
- You can only pay officially
- Work with foreign countries

Escrow services or secure payments

The principle of operation is quite simple. Prior to commencement of work, the customer deposits money to the guarantor’s account, the contractor sees that the money has been deposited. After that, each of the parties can only transfer money to the counterparty, but not pick it up on their own. The money is frozen and none of the parties can pick it up.

The customer can transfer money to the performer, the performer can transfer money to the customer.
In the event of a conflict, the Arbitration comes in and considers the conflict and decides what to do with the money.

The contractor sees that the customer has the money, that he is serious. Here it is, the whole amount, there is nothing left - to complete the order.

It is psychologically easier to refuse an order than in the case of prepayment, when you have already received money, but it is more difficult than in the case of postpayment.

Before the start of cooperation, the customer must have the entire amount in his hands and all this money will have to be frozen for the period of the order. It should be attentive to the choice of the site, not all yogurts are equally useful.

It should also be borne in mind that this is in any case somewhat more expensive than direct payment due to different commissions. Until the moment you lost your prepayment, of course.

The artist will receive money only at the very end. If the project is long, then it may be uncomfortable for a number of performers. Some performers spend prepayments even before they start work.

Risks for both parties is the quality of arbitration. On some resources, arbitration may act unpredictably. Either at their discretion, if the arbitrators are not lawyers, or if the arbitrators are lawyers, but the parties did not know all the subtleties and relied on "maybe" or acted on a whim.

It is useful to maintain correspondence with the text, or at least fix the text with the text. In principle, this applies to any cooperation scheme, but is effective only in the case of escrow.
In general, escrow-services is probably the only way to get financial guarantees for both parties and help in resolving the conflict, if any. Of course, the customer would prefer postpay, and the contractor would pay full payment, there is no doubt. But no one will help in the resolution of the conflict.

Secure payments for freelancer:

+ If the work is done, the payment will be in full
+ Customer is motivated to assist and cooperate
+ No need for additional watermark tricks.

- Payment will be only at the very end

Secure payments for the customer:

+ The contractor sees all the money before the start of cooperation, is motivated to complete the work
+ If the contractor does not do the work - payment will be returned in full

- You will have to freeze the entire amount
- Arbitration takes time and in case of problems it will return money, but not time