Further developing my freelance series, I would like to add a few extra but important points to consider when developing your freelance contracts.
As freelancers we are often faced with the situation in which one project may account for two to three months pay. I am talking about the kind of project that does not allow for any other open projects which would create a substantial income. I am also assuming that you have repeat clients whom you may perform one or two tasks for during the time you work on this large project, but again nothing that constitutes a substantial paycheck. Bottom line is you are relying on this project to keep the bills paid.
Keep in mind I will not be addressing cash reserves you may have in the business to keep you funcitoning in times of delayed income. This article is to look at project delays or cancellations and how I have been considering them in my contracts.
Moving on with the example project. I assume that you have received the appropriate down payment to begin work and have set out the terms of payment for the life of the project so that you will be compensated in a way that allows you to continue functioning as a business throughout. For example you have broken the payments into 4 equal parts, one at the beginning, one at the end and two in between.
You are happily past the design/prototyping stages and well into the development. In fact you are about 90% through to the third milestone or payment in the project and boom, the project is put on hold. Remember now that you have been paid twice at this point but have worked the last three weeks since and are now just days away from your third installment. Three weeks is a long time to go without a paycheck, especially considering that you have pushed out all other potential projects past the completion date of the project currently in motion.
Combating Delays and Indefinite Holds
It’s going to happen at some point in your career, a project will be delayed, postponed or other wise cancelled. The first step towards combating it is planning for it.
Address delays early on and put them in your contract. Delays can be caused by review periods that run over. Clearly define your review periods, when they will take place, the time allotted and the actions that will be taken if they run over.
0.1 Indefinite holds or cancellation of project.
I believe the best way to address this is by adding a short clause in your contract that states payment terms should a project be delayed or put in indefinite hold. Perhaps you agree that you will be paid for all work performed up to the point of delay based on a pre defined number of days that constitutes an indefinite delay. Another point to consider is, what if you are more than 90% done with a project and it is cancelled or delayed indefinitely just before launch. I recommend that a clause be in place stating that you will be paid in full if a project is past a certain percentage when put on delay. For example if you are past milestone two and on your way to three, calculate how far your are towards three and charge appropriately. If you state these terms in your contract beforehand it will be easier to address them should they come up and you are more likely to be paid.
0.2 Extra padding.
Address delays caused by change in scope. Sure a minor change that may take another half day of development time to implement will probably not disrupt the entire project or subsequent projects. However a change that can take considerable, let’s say a week of extra development time, will not only throw off the current project but quite possibly effect subsequent projects.
Address in your contract how these changes may effect both project timeline, payment schedules and accounting for subsequent and pre-scheduled projects.
For example if you find yourself working on a project that due to changes will run two weeks over, you can’t necessarily tell Company B (your next project) that their project will be delayed two weeks due to changes on your current contract. However Company A is not always receptive to the fact that their project although extended appropriately for the requested changes may be extended further due to contract obligations with other companies.
This final one seems to be a bit trickier and I have yet to find the perfect solution. Any thoughts here are appreciated.
I have yet to find a way to account for everything but by continuously adapting the way I do business I feel that I am able to protect myself and business in most cases.
I also suspect that I am not the only one who looks to prepare for these possibilities when it comes to contracts. I am interested to hear others take on these issues.