How to Handle Contracts, Pricing & Payment as a Freelance Consultant
A few decades ago, the term “freelancing” was not used much often. In fact, most people wouldn’t even consider it as a viable career choice.
Fast forward to the present day, the gig economy is booming, and more and more professionals are leaving their corporate life behind to work as freelancers. There have been several surveys regarding the future of freelancing, and almost all of them say one thing: the number of freelancers is going to grow even higher.
Now, as an employee, one has to sign a contract that an employer creates. However, as a freelancer, one needs to create their own contract and get it signed by clients. Basically, how to become a freelance consultant.
In this article, we will discuss essential things to focus on to become a consultant. How to draft professional-looking freelance contracts and how to manage payments efficiently.
1. Why Should You Create Freelance Contracts
As a freelance consultant, you will likely work on a variety of temporary projects. Every project will have a different scope, freelance pricing structure, and timeline. For this reason, you will have to create a new contract for fresh projects.
Also, every new project comes with a different project fee. To ensure that your client understands how much they owe you and their legal obligation to pay you on time, you must sign a contract with them and make verbal promises legally binding.
Not creating contracts as a freelancer may result in confusion on both sides. On the one hand, the client won’t understand the real value you bring to the table, and on the other hand, you will have to face a lot of uncertainty. So, it’s better to draft a contract first and take the project from there.
2. Important Clauses to Include In the Contract
Different freelance contracts have different terms and conditions. But there are clauses that you should certainly include in order to create a freelance contract that is effective and protects your rights during and after the project. Let’s discuss what these elements are.
- Project scope and deliverables: Both you and the client must know what exactly you, as a freelance consultant, are going to offer. When you don’t make the project scope crystal clear from the get-go, the client may ask you to do things that are out of the scope and that will require you to put in extra time and effort, potentially for no extra payment.
- Freelance payment structure: An employee gets an agreed-upon salary weekly or monthly. But a freelancer may need a different payment structure. Based on the project, you could charge an hourly rate, a one-time project fee, a retainer fee, or go for a base + commission model.
- Timeline: Not having a timeline in a freelance contract may result in chaos and missed deadlines. Whether timelines are set in stone or intended to use for reference purposes only, they give both you and your client a clear idea about the progress of the project.
You can have a chat with your legal advisor regarding other important clauses, but don’t forget to mention the aforementioned in your contract.
3. Mention How Often You Want to Get Paid in the Contract
Remember to also include the frequency of payments in your contract with clients. If you want to get paid for billable hours every week, mention it; and if you want 25% of the one-time project fee in advance, you should include it in the contract. Let’s understand various freelance payment conditions in detail.
Stage payments: In this structure, you can set your freelance pricing in such a way that a client has to pay you the agreed fee at the end of each stage of the project. For example, if you’re undertaking a freelance digital transformation project, you could divide the project into stages A, B, and C. You can mention in the contract that the client must pay $10,000 at the end of Stage A in order for Stage B to begin, and so on.
Due upon receipt: You can use this freelance payment strategy for short-term projects with new clients. Basically, this condition requires clients to pay you as soon as they receive the invoice. However, you should try not to use this with old, trusted clients who have offered you long-term projects before.
Net (number of days): This is probably the most common freelance payment strategy used by freelancers. If you want to get paid within 15 days of sending the invoice, you can mention Net 15 at the end of the invoice. Similarly, you can use Net 7, Net 21, Net 30, etc. as per your requirement.
50 percent upfront: When the project is really big, it’s wise to secure at least 50% of the payment in advance. This payment term allows you to do that.
4. Use Technology to Make Freelance Payments and Contracts Easier
Gone are the days when you had to type contracts with your own fingers or pay a lawyer a good amount of money to do it for you. Nowadays, there are digital tools that help you create freelance contracts and let your clients sign them electronically. There are several online accounting and invoicing tools that have made receiving payments easier than ever before.
For instance, PandaDoc is an online platform that lets users create electronic proposals. The company offers several templates that are designed for freelancers. You can also see the progress of each proposal on the dashboard.
Modern accounting and invoicing software offer an all-in-one payment processing package to users. You can pay bills and taxes, claim expenses, receive payments from clients, send invoices, and create accounting reports.
All this will save you a lot of time, which you can use to focus on projects. So, ditch paper documents and spreadsheets, and leverage technology.
You may want to read this article for more details: The Best Software You Should Be Using as a Consultant
In conclusion, it’s worth reiterating the importance of contracts. Freelance contracts boost your credibility and legitimize your dealings with clients. They also offer payment security, given that you have chosen your freelance pricing structure wisely and made it clear in the contract.
on a weekly basis.