Deposit, Terms and $ for Presentation Design
Show Notes – Episode #28
When a new design project comes in, the project billing amount and process needs to be defined. Is there a deposit? What are the payment terms? All very important considerations on the business side of design and the topic of discussion for Troy, Sandy and Nolan this episode.
Hourly vs. Project/flat Rate?
- Nolan: Project rate for templates, identity and if client really wants it. But, generally hourly.
- Sandy: I bill at an hourly rate. For template projects I provide a project cost range.
- Troy: TLC Creative is really setup as an hourly design studio. Project estimates are based on a number of project hours needed. Our other rate is for our showsite events, which are flat fee day rates.
- Nolan: I’ll use a contract about 50% of the time – usually that’s for first projects with someone new. For regular clients, we might have a Master Services Contract that they create and I sign yearly. Going back to hourly vs. project: it’s much easier to work without a contract on an hourly basis. Often, when I’m first talking with a client, they’ll ask for project rate and I explain that I’m happy to do that, but it will mean a very defined SOW which they often are not in a position to create. So, in those cases, I suggest an hourly cap.
- Troy: I am a big advocate of having some sort of agreement with each client. With large corporate clients we have a Master Service Agreement that sets up an agreement for 12-18 months and all projects fall under it. For smaller projects, I include our TLC Agreement which outlines lots of the common ground information, such as needing a point of contact that has authority to make requests and approvals, our early termination rules, and who owns what at the end of project.
- Sandy: I have contracts with only a few of my clients. In general, my contracts consist of estimates and timelines with Scope of Work defined.
Favorite Contract Clauses?
- Nolan: 60 or 90-day finalization clause; 3% fee for post-30 day terms.
- Sandy: Expiration date for estimates.
- Troy: We have a clause, also listed on all invoices, for when a project is not paid quickly. It is “Monthly service charges on overdue balances: 1% 31-60 days, 2% 61-90 days, 4% monthly 90+ days, cumulative.” The other clause, which is newer, thanks to the Presentation Guild, one that really clarifies who is responsible for use of royalty free images, and their use outside of the delivered project.
Weirdest, most infuriating client contract clauses?
- Nolan: Non-competes for training; auto insurance requirement for remote design work in NYC.
- Troy: I will second the auto insurance requirement, which is useless if all is remote work.
- Sandy: Outrageous insurance requirements. I’m usually able to negotiate the contract to accept my current insurance coverage.
- Nolan: Not always, but usually I request a deposit from new clients before any work can start. The reason is not fear of not getting paid, but to get all the vendor and contracting hassle out of the way while I still have some leverage.
- Sandy: On small projects, usually not. Sometimes with new clients. Also, I require 1/2 upfront on very large, long-term projects.
- Troy: There is a difference between existing and new clients. For new clients, yes, we get a deposit. If we have a working relationship, most projects do not require a deposit.
When do you invoice the balance, at end of project, milestones, phases, or other?
- Nolan: Usually at end of project. A lot of people bill monthly, but for me that’s more work.
- Sandy: For those large, long term projects that require 1/2 upfront, I will generally bill the second half in equally monthly installments (that way the client knows what to expect in billing). I provide monthly actuals to highlight the impact of any scope changes, then bill the balance at the end of the project.
- Troy: Generally at end of project, when approval received and final deliverables are with client.
Do you use same rate for all types of work?
- Nolan: Usually, I do have a rush rate.
- Sandy: Same rate for all of my work. Except I bill my project manager at a lower rate. Often clients don’t see the need for project management. In those cases, I will remind them of my rate to do said work and they are happy to pay the PM fee.
- Troy: TLC Creative has 1 rate. It covers everything: PowerPoint, Photoshop, video & audio editing, and admin tasks. This may not be the best business policy, but it is the best option for us in simplifying our admin and invoicing time.
Do you have pre-payment discounts, rush rates, overtime rate, or anything else that changes the invoice?
- Troy: Despite the ease of having 1 rate I just mentioned, we do have several exceptions; Showsite projects are based on flat day rates. Rush rates for after hours and not pre-planned weekend projects are a different rate.
- Nolan: I do discounts on multiple days of training booked at the same time, and I have rush rates of time and a half. I always put in my contracts that the design rate is a non-rush rate and the rush situation will be mutually agreed upon, just to make them understand that last minute requests might cost them more.
- Sandy: My onsite rate is a flat rate and I’m getting better about charging rush or weekend rates.
Ever have a client cancel a project that was in process? Did you get paid?
- Sandy: Nope, not yet.
- Nolan: I always have an evaporation clause that I can charge for work done to date, and I’ve exercised that a few times. Always gotten paid.
- Troy: I can think of a few times where a client cancelled a project. Once was during a corporate re-org and the team we were working with was simply gone and the new team was not going to use the same marketing strategy. We did get a partial payment as detailed in our contract.
Do you have to work with an Accounts Payable or someone other than your project contact to get paid?
- Troy: All the time. Ideally, we have an MSA and an open PO, so as long as the invoice has the right approvals, all gets processed and paid. But, I end up explaining what we do and what an invoice is a lot. But the Accounts Payable department have no reference and we end up either explaining what we provided and justifying the invoice or acting as the communication conduit for the marketing person that hired us and the AP person until everyone agrees to pay the invoice.
- Sandy: Yes. If required, I always include the email address of the AP contact in addition to my client contact.
Cash, check, direct deposit, credit card, barter: how do clients pay you?
- Sandy: Usually check, then direct deposit, then credit card.
- Troy: Checks, direct deposit and credit card (when requested).
- Nolan: ACH (direct deposit).
Terms for Payment: immediate, 30-60-never, and when project is on hold for too long?
- Nolan: 30-days after invoicing. I tend to invoice at ends of projects rather than monthly which does mean I can be waiting a long time. Hence the right to finalize a project clause.
- Sandy: I’ve started to state the terms as “Upon receipt.” Client’s were tending to push the 30-day terms out too long.
- Troy: We do 30 days from invoice date, which is the date the project was approved, not when invoice was sent. For projects that has been on hold for a month with no communication, we close and invoice the project, with a note that additional design work can be invoiced with a supplemental invoice if project reopens. This tends to not get things paid, but get things moving so you can finish project and send invoice for the full project.
- Sandy: Something in writing is important.
- Troy: Send an agreement so your “rules” are in the conversation. Make sure it lists your expected payment terms and cancellation options.
- Nolan: Presentation Guild’s boilerplate contracts are a great resource.
Resources from the episode:
- Sandy: QuickBooks Online.
- Troy: iPad 2nd monitor software, Duet.
- Troy: Great article covering hourly vs. project fees for design projects (here)
- Nolan: Article, The 3 Legs of the Better Presentation Stool
- Nolan: Freshbooks
- Troy: Presentation Guild (members can find the designer contracts in the resources)
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