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It's the nature of working in a creative industry; each job and
client has unique characteristics, requirements, and needs.
Although the professional flexibility can be rewarding, devising a
consistent payment strategy can be another matter altogether. What
may work for one client, may not be quite right for another. Your
best strategy is to approach your payment schedule as you would any
design project, personalizing your methodology with forethought,
research, and creativity.
Several proactive measures and precautions to define your
payment schedule can help prevent future obstacles to a successful
relationship with your client.
Before starting a project, provide your client with all
necessary project documentation. This includes proposals,
estimates, letters of agreement, contracts, schedules, and change
orders. Where applicable, get your client's signed approval.
Although oral agreements are legally binding, they are harder to
prove. If all written documentation is clear and appropriately
detailed, you'll establish a professional relationship from the
start, allowing for any potential disagreements and stumbling
blocks to be ironed out beforehand.
Establish a standard policy that requires partial payment from
clients prior to the start of the project and before any billable
work is incurred. This strategy, termed up-front payment, is
becoming a common procedure within our industry and is usually
based on a percentage of the total project fee or estimate. For
this up-front payment strategy to work effectively, it is crucial
that you enforce it consistently, firmly, and without apology for
all of your clients.
Be cautioned. This simple request can often become a
time-consuming struggle. Clients may give you objections ranging
from the reasonable, “Our corporate procedures preclude me from
processing any up-front payment without either receipt of work or
an approved, internal purchase order,” to the plausible, “As a
small business, our cash flow is tight and overhead payments, such
as rent and utilities, may need to take priority,” to the red-flag,
“Why should I pay for work I haven't seen yet?” or “We don't have
any money right now, but are expecting a large check in soon.”
Respond to these scenarios calmly and creatively.
First, emphasize that up-front payment is a reasonable request
and a common procedure within the design industry. If you do not
receive any up-front payment, then you are, in effect, incurring
billable hours and extending the client credit. This reasoning can
also apply to asking for a deposit or retainer against
Also, without up-front money, it may appear that you are working
on spec with payment promised only upon acceptance. Like other
professionals, such as architects and lawyers, you're hired based
on experience. This means that you're entitled to be paid
regardless of whether your work is accepted or approved—provided,
of course, that your services follow the client's initial creative
direction and are of the same quality and creativity you were
initially hired for.
Familiarize yourself with your client's payment policy and keep
your invoices in manageable increments. Many corporations and
businesses will not pay unless an approved purchase order (PO) has
been processed; the absence of a PO at the time of invoicing will
For large expenditures, your client may have to go through
several rounds of time consuming approvals, often involving upper
management and accounts payable, before a PO will be issued or an
invoice processed. As a rule of thumb, smaller invoices are often
easierto process. Ask your client how much is too much before an
invoice or PO gets delayed because of internal processing and
approval procedures. Once you know the cutoff amount for a large
expenditure, you can adjust your progress payments accordingly.
When you do receive a PO, read it carefully. Clients will often
include special, standard conditions or descriptions that may or
may not be applicable to your project and relationship.
Typically, a client will compensate you for only up to 10
percent of the PO; check with your client for the exact percentage
he or she can pay. If the scope of the project changes and
additional fees are incurred that exceed 10 percent of the PO,
inform the client and request a revised or additional PO.
Many clients have an established policy for how soon they pay
invoices and have timetables that range from thirty to ninety days.
It is important to find this out in advance and invoice
accordingly. For example, if a client pays all in “net 60,” and the
project can be completed within two or three weeks, you may want to
issue all invoices at the start of the project. This will help
shorten the approval and processing time, and ensure payments are
made closer to the project's completion, rather than three months
later. If this isn't possible, you can ask for a large percentage
of your total costs to be paid up front, thereby reducing your
financial liability later in the project.
When establishing a job contract, negotiate a written and
equitable payment schedule, including a due date for each payment
and your specific responsibility or presentation to be delivered or
completed by that date. Don't use vague terminology that can be
misinterpreted such as, “Payment due midway through the project.”
Another important strategy is to indicate that payment is due upon
completion and delivery of the specified presentation or
responsibility, not upon client approval. Such approvals can get
delayed by several days or weeks for reasons beyond your control,
or the project can get put on unlimited hiatus.
Don't rely on client-defined target dates that reflect client
objectives since these may get delayed for reasons beyond your
control. For example, one designer I know who was responsible for a
comprehensive identity project for a store opening was asked to
delay the last invoice until the store opened. Unfortunately, the
opening was delayed several months after the target date. Luckily,
the designer based the final payment on the date when her client
first anticipated the store was to open, rather than agreeing to a
too general statement, “Payment to coincide with the opening of the
During the negotiation process, ask the client for credit
references, three names are standard, and call the references to
confirm credit history. The references should include, if
available, a contact within a related industry like a photographer,
copywriter, or illustrator. Then run a credit check on your client
through a company like Dun & Bradstreet. Keep in mind that a
credit report can't predict either your client's continued
dependability, reliability, or ethics. The report simply provides a
useful credit history on the client.
Include a termination or cancellation clause in your agreement
or estimate like, “In the event of the cancellation of this
assignment, a cancellation fee will be paid by the client and will
include full payment for all work completed, expenses incurred, and
hours expended.The cancellation fee will be based on the prices
outlined in the estimate/proposal. Any initialpayments that have
been received will be credited against any amounts due.”
Trust your instincts. Gut reactions to a client or project can
often guide you in the right direction in formulating a payment
plan—or working with the client in the first place.
Once you complete your research and fully evaluate the unique
needs of each client and project, you can develop an effective
payment schedule that includes several progress payments. Progress
payments are based on a percentage or portion of your estimated
costs. As mentioned earlier, each payment should be due at a
specified, defined project phase and encompass defined deliverables
An advantage to receiving incremental payments throughout a
project versus one lump-sum payment at the end of a job is that
your financial liability throughout the project will be greatly
reduced, especially if the client delays payment later on. Of
course this advantage is contingent upon you effectively managing
and enforcing the payment schedule.
The following payment schedule is commonly followed: the first
third of the estimated project total due prior to the start of the
project, a second third due midway through the project, and the
final third due upon delivery and completion of all
responsibilities. Typically, out-of-pocket expenses and
unanticipated costs, like additional responsibilities and client
revisions or AAs, are either billed upon completion or billed
incrementally throughout the project.
Each project or client may require different solutions and
options. For smaller projects with quick turnaround, two payments
of one-half of the estimated project total may be more appropriate.
However, a lengthy, multileveled project will require several
payments due either on a monthly basis or at specified dates for
each project phase. Progress payment can be the same amount
(determined by a percentage of the project total) or can be
different amounts (determined by the specific costs estimated for
each project phase).
Depending on your business goals and cash flow, you may be able
to negotiate less common, but sometimes viable, alternative
arrangements. Although it's less popular, bartering can be an
acceptable alternative for a cash-starved client offering an
exciting creative opportunity. First check with your accountant,
barter arrangements may be taxable. When bartering, make sure you
negotiate, in writing, an equal value exchange. For pro bono and
nonprofit work, or for projects you accept at a reduced rate, you
can also ask for full creative control and compensation for all
out-of-pocket expenses. If you decide to negotiate such
nontraditional agreements, treat them like your other professional
relationships and have them approved, in writing, by the client.
Also, always emphasize that you're posing a nontraditional, onetime
agreement that may or may not be applicable for the next project.
The downside is that you risk establishing a reputation for these
types of arrangements, possibly lessening the perceived value of
Once you've negotiated a payment schedule, don't assume the
client will follow through. After you mail an invoice, follow up
with a friendly phone call to confirm its receipt and then, a few
days before it is due, call the client to remind them of the
upcoming payment deadline. This last call may be more effective if
you can couch it within a project-related conversation. Most
importantly, discuss payment and collections in a win-win scenario,
maintaining a proactive position. For example, ask if there's
something you can do to expedite payment. You can also offer a
discount to clients for invoices that are paid early, although this
option may not be advantageous for firms with tight cash flow and
should be first discussed with your accountant. Once you have
received payment, follow through with a note or phone call to show
Even if you follow every precaution, there will be clients who
won't pay for various reasons. In those cases, you have several
choices. You can accept the loss as part of doing business and
learn from the experience, or seek help through arbitration,
collection agencies, claims court, or, at last resort, civil court.
A clause in your project documentation clarifying how potential
conflicts will be handled can help. For example, if you prefer
arbitration, the American Arbitration Association recommends
including the following clause in your contract: “Any controversy
or claim arising out of or relating to this contract, or the breach
thereof, shall be settled by binding arbitration in accordance with
the rules of the American Arbitration Association and judgment upon
the award may be entered in any court having jurisdiction
In general, payment strategies, and the processes you go through
to develop, negotiate, schedule, and collect payments should be
flexible and adapted to the needs of you and your client. Just
because you're in a creative business doesn't mean that your
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