How to Set Up a Contract to Guarantee Your Invoices Get Paid

by John Rampton

6 min read

Working without a contract is just asking for trouble. Without a legally binding contract, a client can request your services and then not pay for all your time and hard work. But did you know that a contract can also be used to make sure your invoices are paid on time?

A contract will help outline an agreement to complete work between a vendor and a client. It allows both the vendor and the client to get on the same page when deciding the scope of work, payment rates, payment terms, deadlines, etc. This will hopefully prevent any disputes down the line and ensure both parties understand deliverables and project terms.

Here are some important aspects to cover when setting up a contract between you and a client.

What Services or Goods Will Be Provided?

A contract needs to include what services or goods you’ll be providing for the client. This clearly specifies what work is expected from you and the expectations that your client has set. This is one of the most important components of any contract, and it will help ensure there aren’t any questions or concerns with the work you’ve completed.

To get started on your contract, download our customizable service agreement template for free.

What Are Your Rates?

When creating a contract, you and your client need to agree on your rate. Will you be paid hourly? Monthly? Upon completion of the project? If a client agrees to your rates ahead of time, they are much less likely to dispute those charges when they receive your invoice.

Click here to download our customizable service rate sheet.

What’s the Deadline?

One of the most important elements of a contract is a deadline. While most freelancers and consultants establish their own deadlines, most clients want a project completed by a specified date. When both parties agree to a deadline, the client is assured that a project is finished when they need it, and the service provider guarantees he or she will deliver that work on time. Once a project is complete, a client will pay for the services rendered.

Furthermore, deadlines prevent you from taking on too much work and not completing a project. What happens when you don’t meet a deadline? You don’t get paid.

Download our free project-deliverables timeline to get your deadlines on paper.

How Do You Expect to Be Paid?

Another important aspect of a contract is determining exactly how you’ll get paid. Will it be by check, credit card, direct deposit or through an online payment gateway like PayPal? Additionally, you’ll need to establish a payment schedule, such as on the first of the month or with biweekly installments.

When both parties are aware of how and when a payment is expected, it prevents a delay in payment. Furthermore, it allows all billing information to be in order from the onset, and this can be used to set up recurring billing in accounting software, which will save you time and ensure your invoices are sent when needed.

Professional invoices are the first step to getting paid. Use our free custom invoice template to create and send yours today.

Will Upfront Payments Be Accepted?

Many service providers prefer some sort of payment upfront. For example, it’s common to request 50% upfront and 50% after the project is completed. This helps minimize your accounts receivable and keeps the cash flowing while you’re working on a project; remember, you still have bills to pay.

If a client is reluctant to provide a deposit, retainer or upfront payment, it could be an indication that they’ll give you trouble when you send the final invoice.

Click here to download our customizable retainer agreement.

How Is Non-Payment Settled?

What happens when a client hasn’t paid the invoice by the agreed-upon date? A contract helps settle this matter and motivates faster payments because it will describe and enforce any late fees the client will incur (for example, a 2% interest charge per month after the payment due date).

Besides late fees, agreeing on non-payment terms could mean you stop working for the client until the invoice is paid in full. This comes in handy if you are being paid in installments. For more tips on collecting a late or unpaid invoice, see our timeline for following up with a client who doesn’t pay.

To use a professional template when following up, download our free past due notice.

Who’s Your Contact?

When working on a project, especially one for a large organization, there can be a large number of stakeholders involved. As such, it can be easy for feedback on your work to get delayed since you’re waiting to hear from both your client and his or her team for recommendations. Establishing a single point of contact on your contract will help ensure the project runs more smoothly and deadlines are met, which will increase your chances of getting paid promptly.

You should also have contact with the person in charge of billing. If you can deal directly with them, you’re cutting out the middleman since you don’t have to worry about the invoice passing through multiple hands.

What Happens If the Project Is Terminated?

Sometimes a project gets cancelled. How, then, will you be compensated for the work that you’ve already completed? A termination fee ensures you’ll be paid for the time and effort you’ve already spent on the project, even if it gets canceled. This could also prevent your client from pulling the plug on a project early, as it may be more cost-effective to just complete the work than for the client to pay the termination fees.

Will You Be Compensated for Adjustments?

Let’s say you submitted your work, and the client comes back with a number of recommendations. Now you have to spend additional resources making those adjustments. This clause makes sure that you’ll be paid for any additional work. However, if both parties have agreed on the specific terms of the project, you shouldn’t have to be concerned about too much additional work.

To make changes to an existing contract, use our free amendment to contract template.

Is Your Work Copyrighted?

This may be limited to creative industries, but copyrighting your work is one way to prevent your client from using your work and not paying you for it. In other words, a copyright means your work belongs to you until the client has paid you. This can be especially handy in an industry where writing and photography is involved.

Download our free copyright assignment template to make sure everything’s on paper.

Get Everything in Writing

A contract protects both you and your client from pulling a fast one, and it can be used in case any legal matters or disputes arise. Contracts can also ensure that, when an invoice is sent out, it can be paid on time because it has clearly defined the terms of the work provided, when it’s expected to be completed, how and when you’ll get paid, and what will happen if the client doesn’t pay on the due date.

By using the tips above, you ensure a solid contract is in place before you put in time and effort on a job. Once the contract is solidified, use our tutorial on creating and sending invoices to make sure your invoices get paid on time and in full.

More on Invoices

6 Ways to Get Your Invoices Paid on Time

If you’re having trouble getting invoices paid by your customers, you’re not…

Read more

What Is an Invoice?

Invoices are a tried and true system. Way back before indoor plumbing,…

Read more

Get Paid On Time: The Complete Guide to Invoices

For freelancers and self-employed people, invoicing is an essential part of your…

Read more