I’ve mentioned a few times in the past that freelancing is one of the quickest and most convenient ways to trade your time for some extra dollars. It’s a fun and increasingly popular way to earn more money on the side, or even turn into a full time gig.
In fact, it’s so popular that there now exists a wealth of websites dedicated to helping the whole process. These sites handle the whole shebang and from both perspectives; the customer and the programmer.
You can literally find your customers, submit quotes, handle invoicing, transfer payment, and get rated on your work all on the one website.
Likewise, the customer can also post a job, review potential candidates based on their past success, accept offers and engage someone, pay for the work and receive the product.
It might then be surprising to you that a lot (and I’d bet the majority) of freelance transactions do not actually take place on these websites.
Although the systemisation of the whole freelancing process has now been neatly wrapped in a bow by these websites they still only cater for a small part of the everyday goings on of freelancers worldwide.
So what then happens in the case of all the other transactions? As a freelancer, you’ll no doubt receive offers for work off the grid and will want to know how to handle money in these situations. After all, we’re programmers, not bankers.
How do you know what is appropriate when it comes to money and, more importantly, how do you ensure the risk is minimised when dealing with someone that could potentially be across the other side of the world?
Approaching the topic of compensation
Money is often a difficult subject to bring up, yet we need it to eat and drink and we wouldn’t really be trading our precious spare time for it if it wasn’t a factor. To ignore it’s importance is downright silly.
That said, for many (myself included) it can be a hard topic to get used to talking about openly and many a freelance programmer has been ripped off one way or another either by undervaluing themselves doing work for nearly free.
This is good for the customer, but not so good for you as the service provider.
It’s important to define the point at which you will start charging for your advice and services and to define the point where you will bring up the topic.
Generally it’s not a good idea to lead with the topic of money, you’ll just send the wrong signals that you’re only interested in compensation.
The way I approach bringing up the topic is to first get a good idea about what the customer’s problem is and how you could possibly solve it. If the problem isn’t too hard, or is easily solved it’s probably not even worth my time, so I give away a little bit of free information to see if that will help them solve the issue first.
If the contact continues I’ll generally slip into conversation something non-threatening like the following:
“If you like I could do the work for you, but it will take a couple of hours labour.”
In framing this question you’re looking to basically put it back onto them, subtly, that you can do this work for them for a price and make it more a decision of yes/no. Keep in mind that it’s going to be good for both of you, it doesn’t have to feel like a dirty money grab and it certainly won’t if you’re delivering on value.
Invariably, the next question of them is “how much?”.
Settling on an Amount
Compensation is a funny thing, at first it’s qualitative as in, “does this amount sound reasonable to solve my problem?”.
Then, it very quickly becomes quantitative as in, “what are you doing in the hours you’re charging me for?”.
I generally lead with a rough round figure and tell them I’ll send through an official quote detailing what will happen.
How to Quote Freelance Work
A written quote is a wonderful thing, but also a pain to fill out.
It’s really important that you get good at estimating the actual time it will take to do a job… then doubling it.
There’s just one rule here when estimating time and that’s the golden rule of “shit will go wrong, so plan for it as best you can”.
That’s my own wording of course, but it’s written on the walls of programmers everywhere – it’s the art of extending the truth to cover your own ass and it’s one of the first principles that professional programmers learn in the work force, you always need to leave a buffer of time.
A quotation in a freelance context should be a summary of what the customer will be receiving and roughly how long it will take as well as a price. Generally it is expected that you provide a breakdown of the estimate so it’s always good to itemise things as best you can.
One other thing that I would like to append to this “common view” of what a quote is and isn’t is something that I like to do: Detail your approach.
There’s nothing worse that hiring someone and not knowing what they’re really doing. You start to question whether you’ve hired a flake and you’re just throwing your money away.
If you detail the approach you’re going to take it does a number of beneficial things:
- It puts your customer at ease and gives them the understanding that you know what you’re talking about.
- It gives them an idea about what you’re doing at any given moment in the scheme of the project.
- And it allows you to set deliverables for the project. This has surprising nerve calming effects for clients, especially if there are key milestones that need to be met during the project (for longer projects). It’s how they know the work is really being done.
Even a rough 1 page description of what you plan to do for their project will work wonders for your quote acceptance rate. It will put you above 90% of the other freelancers out there.
How to Invoice Your Freelance Customer
After all that hard work it’s time, at last, to invoice the customer.
Invoicing is generally a no-brainer but it’s also a time to reflect on the job and how things went. Did they goto plan?
Start by comparing your quote to what really happened.
Did you estimate accurately? What, if anything, did you not account for on your quote and is it appropriate to charge for it now?
Good invoicing etiquette is a godsend. When you give a net payable period (net 30, net 14, etc.) it sets the expectation for when the money is due. Don’t forget to add one to your invoice!
Depending on the client of course you may wish to specify longer or shorter net payable periods.
The larger the company, the more likely it is that you will be asked for a net 30 day time period. This is normal and is quite common because these companies usually pay all their invoices in a monthly rotation.
While for smaller freelancers, and people just starting out, this might be an issue for cashflow it’s something that you can get around with a little bit of negotiation and risk minimization.
Minimizing the Risk of Freelancing
There is always a bit of risk when doing work for someone else, but that is the nature of the beast. Sometimes you need to take a bit of a risk in order to get the work.
That said, it’s common practice amongst freelancers to ask for a 50-60% deposit on projects before starting. So if you’re not comfortable with doing all the work upfront and getting paid later then broach this topic as part of your quotation.
Some freelancers do this on 100% of projects. Others do it on the first project with a client and proceed with normal payment terms on subsequent projects.
Really it’s all to do with your risk tolerance and what ever you are comfortable with, just know that the option is there if you need it.
There are a number of options open to freelancers these days when it comes time to collect payment for a job.
Of all the payment options Paypal sticks out at the most common. This is because it’s now a known entity and people trust the service. It’s also great because you can offer a range of payment options to your customer without having to setup a business bank account.
Another option available is a direct bank transfer. While this can appear risky at first, it’s less risky than you think if you setup a dedicated bank account. I wouldn’t recommend it if you are just using your personal bank account unless you don’t have any other options.
A third option would be to utilise an escrow service like escrow.com. An escrow service works by handling the negotiation between two parties and acting as a mediator.
Typically both parties agree on conditions of the deal, the buyer pays the escrow provider the full payment, the seller does the service or ships the product, the buyer then accepts that the service or product has been provided and the escrow provider send the seller their payment.
More Questions on Freelancing?
If you’ve got more questions about becoming a freelancer, or if you’re already a freelancer looking for some good tips then check out the Code My Own Freelancing Business page. There’s a great collection of articles there all about freelancing, just like this one.