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Before I had to focus all my attention on releasing my new book*I wrote an article about getting paid as a freelance professional (See Solving the Payment Problem).
One of my main tips was getting your payment terms in writing. Recently, another contracts lawyer (my apologies I couldn’t find the author’s name on the site) recently posted a similar article entitled Why Freelancers Should Bother with a Contract. The article focused on the ways you could be hurt by agreeing to contractual terms you don’t know about because you didn’t use your own contract. I agree with the article and I encourage you to read it (it’s very short).
I’d also like to offer my own reasons why every freelance professional should have a contract in place for each of their clients and vendors.
Five Ways Contracts Can Improve Your Business
1. You want clear payment terms.
This one was important enough to get its own article. Unless your business is not designed to make money, or if you enjoy spending a lot of time chasing clients for missed payments, it helps for you and your client to know how much they’re paying, when they need to pay and how they need to pay. Those points all go in the contract.
2. You want clear deliverables.
A client can order one service and then expect another. They can order one product and then change their mind. You can deliver the agreed upon product and the client could come back with endless requests for modifications, alterations and “one last change”.
This pattern of behavior can be reduced with a contract. If your deliverables are in writing, there’s less chance for a dispute when they come back wanting more. You can always give it to them, of course, but with a contract you have the option of getting an additional fee for the additional work.
Access our nonpayment resources (including a contract template - it's free!)
3. You don’t want to rely on memories, email chains or texts.
Did you know that “contracts” do not have to be in writing to be enforced? It’s true: A “contract” can be created without the formal process of writing and signing something. This is what you don’t want to happen.
An informal agreement that comes to be viewed as a “contract” is likely to suffer from a lack of accuracy, subconscious bias and interpretation. A written agreement can remove most, but not all of those problems.
4. You want accurate records for your taxes.
At least once a year, you have to account for the truckloads of money you made to the IRS and your state taxation authorities. You could rely on Paypal and Fiverr CSV files, invoices and other receipts, but if you have a contract with each client and payment terms in each contract, it might be easier for you to figure out, and explain if need be, where your income came from.
5. You want to improve the perception of your business.
Certain things make a business appear more professional. Your website, your logo, your address – all of these send a message to your potential clients, vendors and competitors. When you put a contract in place with each client you increase the perception of legitimacy in your enterprise. This is more psychological than legal, but it can save you troubles in the long run.
I can feel your cynicism seeping through the internet. You’re right:
- Contracts take time to draft and negotiate.
- Contracts are not guarantees that your business deals will go well.
- I do have a bias towards you getting a contract because I have a business writing contracts.
All these things are true, but they don’t reduce the value of having a written agreement in place. Whether you get your contracts from me or someone else, there are plenty of good ways contracts can enhance and protect your business.
PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU HAVE SPECIFIC CONTRACT ISSUES OR QUESTIONS, DISCUSS THEM WITH YOUR LEGAL ADVISOR OR CONTACT C3 AT firstname.lastname@example.org FOR A FREE CONSULTATION.
- In case you didn’t know, I’m a writer in addition to running C3. My fourth novel, Smoke and Shadow, came out this week. It’s doing pretty well so far but it’s not selling like Harry Potter so I’m going to keep my day job for now…
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