My Experience
Back then when I started off with Graphics design business, I didn’t ask for deposits from my then clients. It made me feel uncomfortable to ask a stranger for money before having done any work for that person. I also wanted to run my business with more trust, more me proving my value before asking for money. I wanted to build a relationship with my clients. A relationship that would last.

After talking to a client on the phone or exchanging emails I wanted to believe everything would work out fine. I wanted to believe the hard part was getting the client to contact you in the first place and after that the rest would follow easily.
Boy, I was naive.
Unfortunately early on I was ripped off a couple of times by people who never had any intention of paying. I always held on to the main project files until payment was made so they didn’t get anything from me. Though I would put in my best in designing for these client.

These experiences were few and far between,. But they did occur. And one or two is more than enough to make you want to protect yourself.
Another experience over the years has been with clients who continue to expand the project while the project is going on. On several occasions where I didn’t collect a deposit the client would continue to add to the scope of the project just as I was about to finish and be able to collect. Without asking for money the project would just continue further locking me into having to finish the new requests because of how much time and effort I’d invested already in the project.


To a point, I decided to take it up that prior to beginning work I would ask for a deposit. I was nervous the first time I asked, though it’s never been an issue or cost me a job. It’s not the first thing I bring up with people. I usually wait till a time when I feel confident the client will hire me. Never has someone backed out because of my asking.

As a rule I now ask client’s for a deposit. With some long time clients I won’t and with very small jobs where the final price is going to be small enough where I can afford to lose the time, I may not ask for one either. I do know some service based providers who ask for payment in full prior to starting a small job.
One other advantage to asking for deposits is they help smooth cash flow. Many freelance designers will find themselves busy one month and not so busy the next. You’ve probably experienced a few times where you were waiting on a big check while looking at the all the bills you needed to pay yesterday.

Asking for a deposit breaks up the one large check into 2 or 3 smaller ones and makes it more likely there’s some money in the account when you’re paying the bills and for those times you want to invest to grow your business.
The Issue of Trust and Minimizing Risk
There’s a question of trust in all business transactions and relationships. When you’re first starting to work with a new client neither of you know each other. You don’t know if they’re going to pay. They don’t know if you’re going to do the work. At some point you do need to trust each other if you’re going to work together
Without a deposit you as designer take on 100% of the financial risk in the project. While most client’s are good and honest people, it’s possible you get a job done, hand off all the files to the client, and never receive a dime. Or the client could see your finished work decide it’s not what they wanted and move on. Either way you put in a lot of work for nothing.

On the other hand if a client gives you a deposit then they’ve taken on the financial risk for an amount equal to that deposit. They don’t know at that point if you’ll deliver anything. Sadly some designers never do. There are stories of clients paying without ever getting anything in return.
The major difference with the deposit is no one is taking 100% financial risk for the project. In the beginning the client risks 50% (assuming a 50% deposit) of the price of the job as a show of good faith.. After you as designer have finished half the job you’re risking more and more until the project is finished where you’re now at risk for 50% of the project price.

Graphic showing the process of building trust between service provider and client

Some designers will use a payment schedule like a third up front, a third after the client has signed off on the design comps, and a third on completion. In this way no one is ever at risk for more than a third of the the total cost of the project.
Ultimately someone will be at risk during project development and you and the client need to trust each other to work together. Ideally you’ve gotten to know enough about each other to have developed some level of trust and some level of relationship.

 You both ask questions of each other and trust in small ways until you feel comfortable working together.
Asking for a deposit or payment schedule minimizes the absolute risk you take on with any new job.



Some Service Based Business Don’t Require Deposits
In the forum thread I pointed to at the start of this post, it was mentioned that a number of service based business exist where payment is 100% after the work is finished. Not everyone asks for a deposit. These might include:
  • Plumbers
  • Electricans
  • Dentists
  • Auto Mechanics
  • Dry Cleaning
Those are just a few I pulled from the thread and we can easily add to the list. Clearly the standard with some service based businesses is not to collect a deposit.
Plumbers and electricians will sometimes charge for the service call whether you accept the work or not. In some ways this is similar to a deposit in that it minimizes their risk in coming out to your home. It also serves as incentive for you to hire them. Not all will do this so I don’t know if it’s an industry wide standard.

Why do some industries require a deposit where others don’t? What can you do in order to collect on an unpaid invoice?
Luzerne County Courthouse
Your Recourses for Getting Paid
I think a big part to the questions above is the recourse the services provider has. Take an auto mechanic. If you don’t pay they keep your car. They did take a deposit and the deposit is your vehicle. You’re going to pay. The same is true of for the dry cleaner. They have your clothes. You want them back and so you’ll pay their bill.

No monetary deposit was necessary in either case because your physical property stands in lieu of a financial deposit.
Think about plumbers and electricians. They aren’t asking for a deposit and they don’t hold your property. They do have a physical presence. They could for example not leave until you pay them. They also know exactly where you live so they can continue to come back asking for payment.

With the dentist you’re going to need his or her services again. You could always switch dentists, but how long do you think it would be before word got around with the other dentists in your area if you never paid your bill?

All of these business not collecting a deposit have other recourses for getting paid and minimizing their financial risk. Most online service based businesses, designer’s included, don’t have these recourses. We can hold onto the files we’ve worked on or created, but that’s pretty much it. If a client refuses payment there’s only so much we can do to collect. Most of us would take the loss and eventually move on to the next client.
Corporations are people too

 Continued HERE.

Felix Obinna

Creative Visual + UI Designer • Awesome Dude. Curator/Writer at cgminds .