Why Do Our Clients Pay Up-front?
All relationships start building trust on good faith, but good fences make good neighbors. According to the Squads terms, teams and clients can meet halfway on good faith:
- The client puts real money in their account, but they can claim it back until they accept the delivery;
- The team puts real work in, but the IP will only be transferred when the client accepts.
Since the inception in 2013 we’ve held to a strict up-front payment policy on these terms. The reason for this is that in the market where people don’t do that, 40% of freelancer invoices never get paid. From the get go we decided that good customers shouldn’t be paying for bad ones, and that we’re not a bank.
This works really well, and incidentally it’s the way that almost all law firms operate. 100% of our freelancer invoices get paid. We’ve refunded less than 0.1% of the payments. Both the teams and the customers are happy.
Sometimes, however, the Squads model is impractical and clients try to get to a different treatment. Since 2019-q4, this is supported in the platform.
The way it works is that teams can trust clients, and then the clients can book even if they don’t have the credits in the system. You can mark a client trusted as a guardian. Don’t do this lightly because:
- The client can only accept after they pay;
- You’re only getting paid for accepted work;
- Clients are more likely to ask for their money back if they never actually paid it in the first place.
Good reasons to trust a client are that:
- You’ve been working with them for decent time and made good money already;
- The client always accepts and doesn’t stretch the acceptance, OR
- The client seems so awesome you’d not mind if you worked for free for them.
Bad reasons to trust a client are that:
- They work like this with all their suppliers;
- They can’t start the project if they have to pay up-front;
- They keep asking for it, even after you explain why you can’t trust them just yet.
After you decide to trust a client, it’s up to you to decide how many unaccepted weeks you’re comfortable with. There’s no imposed limit from the Squads side, yet a monthly payment should not be a problem for any client. Also paying a bit upfront is only fair because trust is a two way street. So five unaccepted weeks is a lot, two or three is fair.
When you’re in doubt, please reach out. This is an excellent topic for a bit of coaching, and that’s what we’re here for.