Deposit required before work is begun...
December 24, 2007 6:01 PM   Subscribe

One of my clients insists that NO businesses expect to be paid up front, even in part, before beginning work...

...and she’s challenging me to show her any reasonable business person who is willing to pay “in advance” for pretty much anything. The best I can come up with are a few comments on web-design forums and some custom-instrument makers and other artists and crafts-people who work by commission. I’m looking for something a bit more compelling and easily demonstrated; you know, the one-liner argument-stopper that can’t be claimed to be a special-case, individual instance...

So, ARE there any big-time, every-day, basic industries in which a deposit up front is Standard Operating Procedure? What’s that obvious thing I’m forgetting?
posted by dpcoffin to Work & Money (59 answers total) 4 users marked this as a favorite
College tuition. Airfare. Construction materials.
posted by sdrawkcab at 6:04 PM on December 24, 2007

Building contractors, roofers, etc -- all the ones I've ever dealt with ask for part up front, and the remainder when the work is completed.

Colleges and universities ask for tuition before you take the classes, although you can actually often pay on an installment plan.
posted by Forktine at 6:04 PM on December 24, 2007

An attorney's retainer.
posted by Opposite George at 6:05 PM on December 24, 2007

I promise you, this is not a client that you will be happy working with, if she's already trying to bully you about money. Drop her like a hot potato.
posted by lia at 6:07 PM on December 24, 2007 [16 favorites]

Most doctor's offices nowadays require payment upfront for office visits (or, if you have insurance, they require you to pay your copay upfront).

Your client sounds very difficult. If I were you, I'd decline to work with her. She sounds like a recipe for disaster.
posted by amyms at 6:09 PM on December 24, 2007 [1 favorite]

Seconding lia. Why are you bothering to have this argument? State your terms, let her take them or leave them. Lots of people ask for an up-front payment before beginning a job, even if the final price is time-and-materials based.

If she's bickering over this, RUN AWAY. If you are so desperate for business that you can't walk away from a client that's so obviously going to be trouble, you're in deep trouble; that's a different question, though.
posted by Kadin2048 at 6:10 PM on December 24, 2007 [1 favorite]

Every recording engineer I've ever worked with requires at least a deposit.
posted by gally99 at 6:11 PM on December 24, 2007

I require a deposit, usually 1/3rd. Any client who is trying to strong-arm you on this is not worth working for. Believe me, believe the others up-thread.
posted by maxwelton at 6:21 PM on December 24, 2007

In the residential construction field, it is most common to ask for 50% on signing the contract, and the remainder on completion of the work. The contractor has to have money up front to buy materials and to pay his workers.
posted by megatherium at 6:26 PM on December 24, 2007

Mosy wedding photographers require half before, half after.
posted by thebrokenmuse at 6:26 PM on December 24, 2007 [1 favorite]

I am Client Services Manager for an emergency and specialty veterinary hospital. We require a 50% deposit (based on the admitting doctor's estimate of charges) for all patients admitted to the hospital, prior to admission. Every emergency veterinary hospital I know works on a similar model. You can give her my email if you want, but I'd run from this client, too.
posted by Rock Steady at 6:28 PM on December 24, 2007

Well, we're not big time but we require a 40% deposit at my family's retail extension hair and wig stores for any special orders we place. And I agree with Kadin2048 ... sometimes you have to run a little summary costs-benefits analysis with some folks.
posted by notjustfoxybrown at 6:28 PM on December 24, 2007

Definitely building/landscape contractors: I've yet to meet one which will agree to start a job without at least 10% from the client in hand.

Just about anything sold via mail/web order: good luck getting to send something COD.

Gas stations, car rental agencies, and hotels put a hold (basically, a deposit toward your entire payment) for a portion of your transaction before you start to pump or receive your car or room keys.

One of the great joys of working for yourself is being able to refuse to work for someone you don't want to work for. She sounds like a PITA client: seriously evaluate if the benefits of working for her outweigh what is likely to be a long painful road.
posted by jamaro at 6:29 PM on December 24, 2007

Every car or house you ever own is dependent on a deposit.
posted by filmgeek at 6:31 PM on December 24, 2007

The small advertising agency I work for often requires payment up front for its services. And some websites require payment up front before you can run advertisements on them.

But yeah, the bottom line is that you should just tell her she's better off doing business with someone who sees things more her way.
posted by bingo at 6:32 PM on December 24, 2007

This is not a client you want.

In my industry, we bill the client a percentage of costs upfront, because of the enormous outlays we need to make for hotels, airfare, etc. It's almost never been a question. The couple of times it has been a question, we say "Okay, we would love your business, but you need to respect how things work."

Again: this is not a client you want. Find one who doesn't try to dick you around on money before you've even signed anything.
posted by dirtynumbangelboy at 6:32 PM on December 24, 2007

In my experience as an editor, very large/long-term freelance writing/editing/design projects often (though not always) require an initial deposit. My boyfriend works for a friend who's a contractor, and his friend always gets an intial deposit upfront for labor/materials.

But as others have said, the real point here is that this client is showing you very clearly who she is from the outset, and you ignore what she's (inadvertantly) telling you at your peril. What seems clear is that she is cheap, difficult, and unrealistic -- all nightmare qualities in a client -- and that she lacks respect for your need for a regular income (I bet she wouldn't want to pay you half when you get halfway through the job, either). I can almost certainly guarantee the trouble she will cause (and the extra time and labor you will spend trying to please her) will not be worth what you get paid in the end.
posted by scody at 6:35 PM on December 24, 2007 [1 favorite]

I work on long, complex publications. I've never asked for partial advance payment but have received contracts with it built-in. These were for projects that took a few months to wrap-up. I'd be surprised to get it for any small jobs, though.
posted by D.C. at 6:37 PM on December 24, 2007

Get a new client. Life is too short.
posted by caddis at 6:42 PM on December 24, 2007 [1 favorite]

Me (and my industry peers) doing major translations. Writers getting advances.
posted by Abiezer at 6:55 PM on December 24, 2007

When I ran my own communications company, we always billed a percentage up front to new clients. My reaction to a client like this one was typically to beef up that percentage to compensate for the additional hassle they were bound to present. Or, just drop them.
posted by itstheclamsname at 6:56 PM on December 24, 2007

Every appraisal I ever did was paid up front.
posted by 517 at 6:59 PM on December 24, 2007

My design firm bills 50% up-front, 50% on delivery for fixed-bid projects. Agreeing with everyone up-thread who says you should drop this client. No big-time, every-day, basic industry should accept petty haggling up-front as Standard Operating Procedure.
posted by migurski at 7:03 PM on December 24, 2007

It is absolutely standard for vendors attending big trade shows to require COD on unestablished accounts. If a business has not earned your trust, there is no reason to extend credit, especially if it is something like web design requiring a lot of creative energy that you can't apply to any other product. If someone is giving you a hard time, I think you should heed the warning bells and know you will be fighting for every nickel and they'll never be a happy client. They've probably burned out everyone else in the industry and are trying to bully you into a deal hoping you are desperate for the business. Don't do it.
posted by 45moore45 at 7:09 PM on December 24, 2007

In my experience, the only companies that don't want at least some cash up front are those that will be working on something expensive of yours, that they keep in their custody. Want your engagement ring back? Then you'll have to pay the jeweler who retipped your prongs. Is it a silver ring you spent twenty bucks on? Probably they'll ask for the cash up front. Etc.

But this is not an argument you need to have, as said above. Either this is a new client looking for an angle (in which case let it go, they're not worth your business), an existing client who hasn't screwed you in the past but isn't good enough for you to make an exception (in which case you should stick to your guns), or a really good customer worth making an exception for (in which case you wouldn't ask the question, I'm guessing).

Trying to "make your case" on something like this puts power in the hands of the client that belongs solely to you -- your company policy regarding payment. If this client falls in the last category above, feel free to make an exception. That kind of special treatment keeps the solid, good money, repeat customers coming back.

Otherwise, just politely state that experience has taught you that getting at least a substantial deposit up front is the best way to conduct your business. Don't be rude or overfirm about it, don't make a point of bringing it up, just when it becomes an issue, apologize and say something like "I'm sorry, but in my experience this is the best way to run my business, and it's how I treat all my customers." Anyone who's not already a valued customer of yours who would consider something like this a deal-breaker is generally more trouble then they're worth, and may actively try to fuck you over.
posted by middleclasstool at 7:16 PM on December 24, 2007 [1 favorite]

I'm a writer. I get 50% up front and 50% on completeion.

I just built a house. I paid every trade a deposit upfront.
posted by unSane at 7:33 PM on December 24, 2007

Interesting read! As 50% up front is the SOP for new clients in many businesses, it makes you wonder why your client is so unfamiliar with how the business world works. Is she new to the work world?

I like what middleclasstool said. Perhaps rather than put the burden on you, tell the business person that you would welcome the chance to work with her, and that you feel you could meet her needs, etc. But that you recognize she has a different impression regarding the deposit issue and your respect it. Wish them best of luck in their endeavor, but say that if they change their mind, you would once again welcome the opportunity to work with them.

Actually now that I think about it, perhaps everyone is right and this client is just waving red 'difficult client here' flags all over the place. :)
posted by anitanita at 7:42 PM on December 24, 2007

Your question should have read, "One of my former clients insisted..."

No one pays upfront? Insanity. She's never bought a plane ticket? Whatever answer you give her, she's going to argue with it. Bullies and tyrants are like that. Are you willing to invest an extra 50% effort to recover fees? Do you want to renegotiate terms constantly?

Just drop her. Or bill her at an exorbitant rate and tell her why. Then she'll drop you. Either way you're rid of her.
posted by 26.2 at 7:42 PM on December 24, 2007

lia writes "I promise you, this is not a client that you will be happy working with, if she's already trying to bully you about money. Drop her like a hot potato."

And not to mention, you're already, before any payment by the client, doing work -- researching for the client what businesses require deposits.
posted by orthogonality at 7:50 PM on December 24, 2007 [1 favorite]

Any artist or artisan is going to require, at very least, a deposit.

Good luck with this client. Were I in your shoes I would tread very carefully.
posted by lekvar at 7:54 PM on December 24, 2007

Custom jewelry work, 1/3 estimated total is paid as deposit. Similar for any other artist/artisan. Nthing all construction/contractors, also.
posted by desuetude at 8:06 PM on December 24, 2007

The obvious thing you are forgetting is that you are not a "big-time, every-day, basic industry" you are an independent contractor who will have absolutely no recourse if she stiffs you.

You could, of course, do the work "on spec" and then refuse to turn it over until she pays you in full. I'd love to hear her argument against that.

(I am an independent consultant and free lance teacher. I make all new clients pay 25% up front and all new students pay for the first four lessons up front. People who balk do not get taken on as clients/students. After we have established a relationship I will relent, but by then of course it's a nice pattern and most people just stick to it.)
posted by nax at 8:12 PM on December 24, 2007

I run an IT services company. We install servers, networks and network equipment, workstations and peripherals. We also support the equipment once it's installed. We have two pricing structures in play.

The first is time and material. You call, we come, we fix, you pay, we leave. Very straightforward. T &M rates are usually 25% - 35% higher than project billing.

The second is "project billing". Under project billing we require either a 20% or 25% down payment on all work (the 5% variance relates to the client PITA factor - if the client is a Pain In The Ass, it's 25% otherwise it's 20%). In exchange for this, the client gets a cheaper billing rate and progress billing through the project. Our terms are not negotiable, and I, not the client, decide if the work will be done under T & M or project billing.

Up front payments are a very, very standard billing practice, especially where a time or cost commitment comes before actual work commences. If any client of mine balked at an up front payment, I'd offer them the T&M rate instead. Take it or leave it.
posted by disclaimer at 9:02 PM on December 24, 2007

Rent requires first, last and a security deposit before you get the keys.

Cell phone companies charge you for a month's service plus activation fees before you make a single call.

Car insurance companies make you pay up front as well.

Nthing the "do not work with this client" piece of advice.
posted by Brian Puccio at 9:27 PM on December 24, 2007

T-shirt printing -- new clients, ALWAYS 50% down. Once you're established, maybe COD. 15-30-day net for contract (I.E. I don't have to buy the stock -- just print yours) if you're really nice, and pay your bills on time.
posted by Devils Rancher at 9:40 PM on December 24, 2007

I was going to say screen printing but Devils Rancher beat me to it. I ran a small shop for a few years and I required everything to be paid 100% in full up front, 50% deposit for people who had previously ordered without any issues, and COD for regular clients that I liked working with if they wanted it.

I learned pretty early on that that was the way it had to be if I wanted to get paid (I did a lot of band shirts.... talk about flaky clients!)
posted by bradbane at 9:50 PM on December 24, 2007

Long lead time items for industrial construction (vessels, large pumps, sizable heat exchangers, etc) require some up front down payment, as well a few other payments at key points in construction.

Nthing the "find a new client" comments. This is not the kind of person you want to have to do business with regularly.
posted by conradjones at 9:51 PM on December 24, 2007

Um, almost every big ticket item requires some security. I just ordered a pile of stuff from Lowe's, for crying out loud, and they wanted a credit card for 50% deposit.

As everyone above says, though, you've already lost, and you can tell this by the fact you're having the argument. The right answer is "Okay, you should probably find someone else to work with, then."

Every minute you spend talking to this client from here on out is wasted.
posted by rokusan at 10:17 PM on December 24, 2007

Just to offer another view point, most large companies expect everything to be Net 90 (government might be even longer). It could be that she is scoffing that you expect to be _paid_ before starting but would be OK with you submitting an invoice at start time.

In a previous life as a small software company doing work for much, much larger companies we often had to do work on spec an only got paid on milestones or delivery. A basic plan would be 25% at completion of design, 25% at alpha, 25% at beta and 25% at ship.

If I was hiring someone I'd be flexible but 50% upfront is a bit steep, unless there are substantial material costs, but it really depends on the length of the project. When someone asks for a lot up front it says to me that they don't have the resources to get by without my money and that they might not be around if anything goes wrong.

Obviously there are a lot of 1-man shops out there and they all have to start somewhere but IMHO, it should be your goal to have 6 - 12 months of operating expenses in the bank. It will allow you to work a bit on spec and go after bigger fish.
posted by IronSurfer at 10:25 PM on December 24, 2007

Promotional products vendors require full payment before anything is printed. The clients also typically sign a contract agreeing to be charged for any overruns the manufacturer may have completed.
posted by pinksoftsoap at 10:27 PM on December 24, 2007

Every time I ever made hotel reservations in Vegas, they always required a deposit immediately.
posted by Steven C. Den Beste at 10:37 PM on December 24, 2007

I believe you have to pay at least part up front for airline tickets, too.

I agree with everyone else. You want nothing to do with this client.
posted by Steven C. Den Beste at 10:39 PM on December 24, 2007

Freelancing for 15 years. ALWAYS got something (usually 50 percent) up front.
Echoing what's said above. The way a client is at the beginning, is the way they'll be through the whole process. (I've found this fairly consistent with people as well) I've sent clients packing halfway through the bidding process because of their unrealistic demands.

I also HATE HATE HATE the argument technique she seems to be using: "Give me ONE example of what your saying. Come on! One! I'm waiting!?

Every person I've ever dealt with that behaved like that was a manipulative bully.

I know that I'll breathe a sigh of relief when you tell us how you showed her this thread as a precursor to telling her that you didn't want her business...
posted by asavage at 11:33 PM on December 24, 2007

I've been a consultant for more than 10 years. I run a blog on how to become a consultant. I get a lot of email from people who work as consultants. Deposits are standard. I ask for 50% up front in most cases, unless I've got a long-term relationship with the client -- and, even then, I take a deposit. Sure, some people may not require them, but that's their choice. You have the right to a deposit.

In many jurisdictions, a contract for work is validated by the expectation of consideration. In this case, a deposit makes it clear that consideration is involved. Consideration is pay.

That being said, you don't want a client who's pulling this at the beginning. They're most likely going to be trouble. Run.
posted by acoutu at 11:46 PM on December 24, 2007

Dittoing the freelancing. I always require a deposit upfront before beginning any design work. There was a time when I didn't in the very beginning, and I wasted a lot of time on clients who knew every last nitpicky detail of what they wanted but strangely didn't know how to pay for it.
posted by katillathehun at 12:12 AM on December 25, 2007

Agreeing what others have said. But on top of that, even if you were the only person in the world to ask for those terms, hey, its your business and if a potential client doesn't agree to those terms, then that's there loss. You have no obligation to prove anything to this person. State those are your terms, take it or leave it.
posted by [insert clever name here] at 12:13 AM on December 25, 2007

the one-liner argument-stopper that can’t be claimed to be a special-case,

"This is how I run my business."

As others have pointed out, getting a deposit is a practical requirement when freelancing.
posted by Brandon Blatcher at 12:48 AM on December 25, 2007

I am an accountant, more specifically, I have been an auditor in the past. I have carried out a lot of work around Accounts Receivable and the recognition of revenue. I have worked on clients from huge international hotel/motorvehicle/hi-tech corporations to small family firms. All have different payment terms, all of which are consistent within the markets that they operate.

If your payment terms are consistent with competitors then your client has no right to grumble at all. 90 days net is common in large businesses for customers with which there is an established trading history and there are no known cashflow issues. For example, even companies on a huge scale may demand a deposit/prepayment/COD if they anticipate cashflow issues or trading difficulties at the customer. The one thing with these huge companies is that they should have sufficient liquidity to cover off the lag between issue of the goods and not where it thinks the client will and can pay.

I guess you are not in the same position as General Electric or Wal Mart. In this case, it is fine that you demand a significant deposit up front. Indeed, I can think of no reason why a customer would want to jeopardize a project by refusing some much needed funding upfront which may lead to potential issues with the supplier not completing the project.

Secondly, even large companies recognise that if they want to get something done by a small specialist they may need to flex their terms. For example, when a large biotech company I audited needed new mold injection designs, they went to a small, local specialist company to do this. The company couldn't afford to do all the work without some up front payment and so the customer recognised this and relaxed it's payment terms.

I could go on and on about how reasonable it is to ask for a deposit and she still wouldn't listen though. All I can say is that, from a totally independent viewpoint, your requests are reasonable. As many others have said, perhaps it would be worthwhile missing out on this.

Give her this chat and see what she says:I would welcome the opportunity to work with you but these are my standard business terms. If you change your mind, or would like me to work on a project on the future then by all means call me and we will see what we can do.

If she or her organisation are worth their salt they will call back. If not, why worry?
posted by ClanvidHorse at 1:57 AM on December 25, 2007 [2 favorites]

Wedding photography (wedding anything, I think).

1/2 when the contract is signed. 2nd 1/2 1 week before the wedding.

Photographer cancels, he refunds the money. Couple cancels, they get nothing.
posted by sully75 at 3:41 AM on December 25, 2007

Architects. Structural Engineers. MEP Engineers. Surveyors. Building Code Consultants & Expeditors. All require a retainer (usually 50%).
posted by yeti at 6:49 AM on December 25, 2007

With the exception of P.O.D., every delivery service from UPS to the United States Post Office (gotta have that stamp on there!) demand payment up front.
posted by Atreides at 7:21 AM on December 25, 2007

Drop the client immediately. She's clearly unprofessional and not worth what few pennies you might squeeze out of her. Give her an outrageous quote or suddenly get very "busy" with "a new project" that came up while she was refusing to commit to hers. Your "new project" could be improving your marketing so you get better prospective clients.

I work in a field that's similar to web design and copywriting, and my clients are other businesses. All my new clients pay at least a third up front. Existing clients who have proven their dependability pay as we go. I weed out inexperienced or unprofessional prospects by telling them my fee early in the conversation.

Good luck!

P.S. Another example: book advances.
posted by PatoPata at 8:07 AM on December 25, 2007

I should clarify that the "pay as we go" arrangement I mentioned is for huge projects that last for months. I bill monthly for those.
posted by PatoPata at 8:15 AM on December 25, 2007

Response by poster: Wow. Thanks, all; very helpful; best answers all around!

No doubt, as ClanvidHorse perceives, I could go on and on about how reasonable it is to ask for a deposit and she still wouldn't listen though.

I’m feeling much jollier, tho. Peace, and thanks again...
posted by dpcoffin at 8:34 AM on December 25, 2007

Merely by having the discussion, you've already acquiesced to working on her terms. Even if you were to point out one of the countless examples cited upthread, there's no doubt in my mind she'd rebut it with how, well, that's different than what you're doing.

As a freelancer, the most valuable thing you can learn is how to trust your gut when it comes to taking on new clients. There's a little voice in your head that will occasionally scream "RUN!" -- learn to hear it.
posted by Doofus Magoo at 10:16 AM on December 25, 2007

Anything retail, ever. I'm a business owner, and I'm most certainly not going to supply product without an up front payment. If it's someone I've done business with before, I might allow for a partial deposit, but if it's someone I don't know from Adam they'd jolly well better pay me in full up front!
posted by medea42 at 10:57 AM on December 25, 2007

Seamstress, deposit of at least 50% required up front. Sometimes more, depending on the work.

Anyone who is funny about paying even a deposit upfront is someone who doesn't plan to pay, IME.
posted by Kellydamnit at 5:54 PM on December 25, 2007

You get a deposit for two reasons that are apart from needing an income and having to pay expenses you will occur on a project: One is that with you having gotten money already, you are expected to actually carry out the work that you've agreed to do. This protects the client. The other is that the client already has money invested in your work, and they have an incentive to work with you through completion so that they don't have to eat sunk costs. This protects you.

Deposits are good for both parties involved. If someone doesn't want to leave one, then they're expecting the project to be a one-way street.
posted by azpenguin at 10:01 PM on December 25, 2007

and she’s challenging me to show her any reasonable business person who is willing to pay “in advance” for pretty much anything.

And I'm challenging you to show me any reasonable business person who is not willing to pay in advance for anything requiring up-front labor or materials expenditures, and/or a show of good faith. That's the whole basis for x% up front, y% at the end; the client establishes a good faith commitment to their service provider, and the service provider has establishes a good faith commitment to their client.

Over time, as you establish a relationship, up-front monies often stop being required, but frankly this person is either horribly inexperienced (and so I wouldn't trust her to have the money later, as they'll either lose it or won't make it in the first place) or conning you.
posted by davejay at 10:26 PM on December 25, 2007

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