The Editor’s Guide to Getting Paid: How to Set Payment Terms as a Freelance Editor
So you've taken the leap into running your own editorial business—congrats! But let’s be real, figuring out the financials can be a bit overwhelming. How do you set payment terms that are fair for both you and your clients?
Don't worry; if you're wondering how to set payment terms as a freelance editor, you're in the right place. Let's break down the ins and outs of setting up payment terms that work for everyone.
How Should I Accept Payment?
Before we dive into the various ways to set your payment terms, let's talk about how to actually accept those payments. In today's digital age, online payments have become the norm. They're quick, convenient, and let's face it, nobody wants to wait for a check in the mail anymore.
There are several reliable payment processors out there, including PayPal, Stripe, Square, Wise, and Zelle. It’s crucial to set up business accounts with software services like this; don’t attempt to accept money for your services using your personal account with any of these companies (this goes against their terms of service and can land you in hot water with the IRS). These platforms are secure and widely used, making it easy for clients to trust the payment process.
If you're looking for a more streamlined approach, consider software that combines invoicing and payments in one platform. Tools like Quickbooks Online, Dubsado, and Wave make it easy to send invoices and accept payments in one place, all while keeping track of your finances.
One final note here: while it might be tempting to pass on the processing fees to your clients, hold on a minute. Charging clients extra for processing fees can make them feel nickel and dimed, it goes against the terms and conditions of the payment processors (and credit card companies), and it’s even illegal in some places. Plus, these fees are a tax deduction for your business! Check out my detailed post on why you shouldn't avoid payment processing fees for more.
Should I Require a Deposit?
When you're just starting out, you might wonder whether you should always charge a deposit or if it's okay to take payment at the end of a project. While both methods have their merits, there are some significant risks associated with the latter.
The Case for Deposits
- Commitment: A deposit ensures that your client is committed to the project, reducing the likelihood of last-minute cancellations.
- Cash flow: Receiving a deposit helps maintain a steady cash flow, allowing you to cover initial costs and time investment.
- Risk mitigation: A deposit acts as a safety net, providing some level of compensation should the project fall through for any reason.
The Dangers of Post-Project Payment
- Non-payment risk: Waiting until the end of a project to charge opens the door to the risk of non-payment. Clients might delay, default, or even disappear, leaving you uncompensated for your time and effort.
- Cash flow disruption: Without a deposit, you're essentially working for free until the project is completed. This can disrupt your cash flow and make it challenging to manage your finances.
- Lack of commitment: Without a financial commitment upfront, clients might feel less obligated to stick to timelines or even complete the project, putting you in a precarious position.
Unless you're working on very short projects where full payment upfront is standard, or you know and trust the client to pay in full after the project is over, always charge a deposit. It's a best practice that safeguards your time, ensures a level of commitment from your client, and helps maintain a healthy cash flow.
Should I Offer Installment Payments?
Unless you're charging 100% upfront for every project, installment payments are almost a given in the freelance editing world. They're particularly common for longer, more involved projects like book editing. The exception might be very short projects or a batch of short projects, like editing individual blog posts, where charging the full amount upfront is more feasible and generally accepted.
There are several installment payment schedules to consider:
- 50/50: This balanced approach involves charging 50% as a deposit to hold the client's slot and the remaining 50% upon project completion. This is the most common installment schedule in the industry.
- 33/33/33: This option breaks the payment into three equal parts: a deposit, a midway payment, and a final payment. It's another way to offer a more flexible payment schedule for clients, especially those on a budget. This can be a good option if you’d like to help a client with limited cash flow, without creating too much extra work for you.
- 25/25/25/25: This method breaks down the payment into four equal parts, usually tied to project milestones. It provides a steady cash flow but can be a bit more complicated to manage. I generally don’t recommend this payment schedule unless the project rate is at least $6,000 and the project will last at least three to four months. Otherwise, it’s usually overkill.
How to Choose
- Project length: For short and quick projects, 100% upfront is widely accepted and will be more manageable. For longer, more involved projects, 50/50 or 33/33/33 installment payments usually work best.
- Value to the client: If you're working with indie authors, students or professors, researchers, or any client for whom cash flow is more difficult, offering installment payments like 33/33/33 can make your services more accessible and highlight your value. By offering installment payments, you’re being helpful.
When it comes to figuring out how to set payment terms as a freelance editor, the 50/50 approach is often the best bet for most scenarios. It provides a good balance, ensuring you get a commitment from the client while also giving them peace of mind that you're invested in the project. However, if you're working with budget-conscious authors, consider the 33/33/33 option as a way to make it easier for them to hire you.
Additionally, your contract should make it crystal clear that you won't return the final, edited file until full payment is received. This won’t be possible with companies and publishers who set their own terms, of course, but with individual clients, this is the industry standard to prevent issues with non-payment.
The Risks of Extending Credit Through Installment Payments
While offering installment payment schedules like 50/50 and 33/33/33 can make your services more accessible to clients on a budget, it's crucial to understand that you're essentially extending credit to your clients. And with that comes a set of risks, including:
- Cash flow disruptions: When you offer installment payments, you're relying on future payments to maintain your cash flow. If a client misses a payment, it can disrupt your financial planning and even your ability to operate.
- Increased administrative work: Tracking multiple payments for various projects can become an administrative headache. The more complex your payment structure, the more time you'll spend on bookkeeping instead of editing.
- Potential for non-payment: The reality is, the longer the payment is stretched out, the higher the risk of non-payment. Clients might run into their own financial difficulties, leading them to default on payments.
- Strained client relationships: If a client does miss a payment, it puts you in the awkward position of having to chase down that payment, which can strain the client relationship.
While offering these types of payment terms is seen as the norm in the industry, it’s important to be aware of the possible problems you may encounter from time to time. If you decide to offer installment payments, make sure to have a clear contract that explicitly outlines your payment terms, the payment schedule, consequences for late or missed payments, and your policy regarding the release of the final file upon payment.
Other Payment Terms to Consider
So you've got the basics down on how to set payment terms as a freelance editor. But what about those other nitty-gritty details that can make or break your financial flow? Let's dig into two additional policies to consider:
Late Payment Policy
Having a late payment policy is like having a safety net for your business. Specify in your contract what constitutes a "late payment" (e.g., payment received more than seven days after the invoice due date). Consider implementing a late fee, either a flat rate or a percentage of the invoice, to encourage timely payments. Make sure to communicate this clearly to your clients upfront to avoid any surprises.
Life happens, and sometimes projects get canceled. Your contract should outline your refund policy clearly. For instance, you might state that the initial deposit is non-refundable after work has commenced, or you could offer a partial refund based on the amount of work already completed.
Setting up payment terms as a new freelance editor can feel like navigating a maze, but it doesn't have to be that way. By understanding your options and the risks involved, you've taken a significant step in learning how to set payment terms as a freelance editor. Keeping the recommendations above in mind, you can create a payment structure that works for both you and your clients. So, set your payment terms with confidence and focus on what you do best: editing!
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