Getting paid is the number one concern I hear from freelancers. And, either you deal with this issue up front in your contracts, or later when you deliver the work product and your client doesn’t pay on time, or at all.
Wouldn’t it be great if there was a system to ensure that you get paid consistently so that you aren’t chasing clients for money? Well, there is and it’s simple. It’s called the Replenishing Retainer.
You’ve probably heard of legal retainers. But freelancers can use them too.
In a nutshell, a retainer is a sum of money that your client pays upfront, and before you begin any work. It can be a fixed amount for the contracted work, or your hourly rate is billed against the retainer.
This type of “traditional” retainer helps you get paid. The Replenishing Retainer does too, but it also ensures consistent cash flow.
Here’s how it works
For hourly rate clients, your contract will contain a provision that requires the client to pay to you a specific sum of money in advance of beginning work on the project. Let’s say that the amount is $500.00. You begin work on the project only after you receive the retainer. Then, as you work, your hourly rate is subtracted from the retainer balance.
When the retainer balance drops below a certain dollar amount, for example, $100.00, the client will “replenish” the retainer back to $500.00. And you don’t continue working unless the retainer is replenished.
The Replenishing Retainer also works for clients who pay you a flat fee or subscription rate. With these types of projects, the client pays to you a specific amount of money each month (or quarter or year) to ensure your availability for ongoing projects.
The client will pay the specific fee amount at the same time (usually the beginning) of the month (or quarter or year). Work does not continue until the client pays. Once the retainer is paid, you continue the work.
One way to ensure that you receive prompt payments for these types of fee arrangements is to get a credit or debit card authorization in advance for the duration of the contract. That way, the fee amount is charged to the debit or credit card at the same time each month (or quarter or year), and there is no delay in payment.
When you start using the Replenishing Retainer, you’ll find that cash flow problems will become a thing of the past. You won’t be chasing clients for money, and if they don’t replenish the retainer, you don’t work. It’s as simple as that.
I use the Replenishing Retainer for almost all of my clients (some work I do is on a one time flat fee basis). So I know it works. And it can work for you too.
If you have cash flow issues or problems getting paid on time, implement the Replenishing Retainer right away. And let me know what you think about this solution, or feel free to ask questions, in the comments below.