(no subject)

[nonelvis]

If you run a services business, are thinking of running a services business, or freelance, you should watch this. My business has been fortunate enough that we've never had to sue anyone for payment, but have we had problems getting paid? Oh yes, and any small business owner will tell you the same thing. What saves our asses? The contracts we have people sign. It's not about screwing anyone; it's about setting the terms under which we deliver services and get paid, and making sure our interests, as well as the client's, are protected.

Comments

[nonelvis]

Well, you bring in the lawyers, you must automatically be confrontational, right?

The closest we've ever come to having to enforce one of our payment clauses on a contract was when a client was wildly overdue and kept failing to pay our invoice, despite having plenty of cash. Funny how quickly they paid when we reminded them we had the right to start charging interest, given how late they were. It's an emergency clause we've never needed to exercise, but the fact that it's there helps make sure everyone plays together politely.

[profrobert.livejournal.com]

You should not only have an interest proviso (at the maximum rate allowable under state law), but also an attorneys' fees provision and an indemnification clause that specifies indemnity for any costs associated with collection.

Did you have a lawyer look over your standard contract?

Also, one word: retainer. You hold the money, so you don't have to worry about getting paid.

[nonelvis]

I'd have to double-check on the attorneys' fees and indemnification clauses, but I think they're both there; our lawyers drew up our contract, and I'm sure they would have added things like that.

We do always get a retainer before starting work, but the situation I mentioned above was for a client who was paying us on a time and materials basis and had long since gone through their retainer.

[profrobert.livejournal.com]

Let me introduce you to the concept of the Evergreen Retainer. The idea is that you never draw on it and ideally return it to the client at the end of the job. If you do have to draw on the retainer, you bill to replenish it -- hence it is "evergreen."

[nonelvis]

That sort of retainer isn't one I've commonly seen design firms use, and I know at least one of our clients wouldn't go for it. But some of the larger corporate ones might ...

[profrobert.livejournal.com]

And not all of our clients will agree to a retainer at all (though if they do, it's always evergreen). At that point you have to decide if you're willing to take the risk and whether the business is worth it.

Here's the type of language we use: "As is our usual practice, we will require an 'evergreen' retainer at the outset of this Matter. In this case, the amount of the retainer will be $________ [two months' anticipated work is a good starting point]. You agree to restore the retainer to that amount upon the receipt of each Statement from the Firm. If the scope of the anticipated work on the Matter changes, the Firm may lower or raise the retainer amount required. Any amounts on retainer remaining after the completion of the Matter will be returned to the Client."

How long is your standard contract? I'm not an active member of the Mass. bar, but I'm happy to spend 10 minutes looking at it to see if there are any things that jump out at me.