How to Ask for Upfront Payments: Payment Types and Structures + Expert Comments

Have you ever wondered how you can improve cash flow, reduce financial risks, and build committed relationships with clients as a small business? The answer is simple — ask for upfront payments. 

Requesting to get paid as a freelancer should be done with strategy and tact. Explore pros and cons of upfront payments, various payment structures from deposits to retainer fees, and practical expert tips in today’s article. 

Pros and cons of upfront payments

It may seem like there can be no disadvantages to upfront payments, but it’s not all sunshine and rainbows. Before making a big decision, check which cons you may potentially have to deal with. 

Pros:

• Help establish a healthier cash flow. Cash flow is the amount of money coming in and out of your businesses over a certain period. It is essential to the livelihood of any business, big or small. Cash flow determines the ability of your business to cover expenses, invest in growth, and remain stable financially.

Keep in mind asking for upfront payments is just one of the ways to improve cash flow. 

• Reduce risks and increase commitment. By requesting an upfront payment, you can filter out clients who are not ready to follow through, making it a safer option for you. ‍
• Save your time. Customers who are paying in advance are less likely to cancel appointments and orders last-minute.  

Cons:

• Might deter new clients. With so many scammers online, it is logical that some prospects may be cautious about paying upfront.
• Can worsen relationships with current clients. If you didn’t charge upfront before, introducing this practice can be seen as a sign of mistrust. 
• Add administrative tasks. You need to ensure upfront payments happen on time. Keeping track of all transactions can be challenging, especially when you don’t have a system in place. 

Consider these pros and cons before switching to an upfront payment policy. In most cases, however, it is still worth implementing. By the way, I’m covering the ways of overcoming the cons later in the article. Now, let’s see what types of prepayments there are. 

Types of upfront payment structures

There are essentially four major upfront payment structures: 

• Partial payment and deposit. You can set a certain percentage of the overall service cost to be paid upfront. This way both you and your client show commitment. The rest is normally paid upon completion. 

This first partial payment can be also in the form of a deposit — a non-refundable amount a freelancer charges before starting the work. 

• Full payment in advance. With this type, you charge a full fee before the work begins. It is less widespread than the previous type. Businesses can use this model when working with clients notorious for late payments or last-minute cancellations. ‍
• Milestone payments. Payments in this case are tied to project stages. Milestone payments make sense when you’re working on a large-scale project. 

Moving to the next stage means the client is happy with the work you provided so far. Charging per milestone safeguards you from constant tiny edits some customers like to overindulge in. 

• Retainer fee. This model typically works like a subscription when the work is ongoing. For example, legal and consulting services or IT support. Fees can be fixed, hourly, and sometimes, project-based. We have a whole article dedicated to retainer fees here on Solowise — make sure to check it out. 

As you can see, the payment model depends on various factors, including the industry you’re in and the project scope. Many professionals offer several upfront payment options for clients to choose from. 

Expert tip: give clients payment options

It’s a good idea to see how others charge upfront before introducing this practice to your own business. Our expert Gabrielle Seaton runs her own agency, NextTech Recruitment, sourcing niche IT talents globally. She shared her way of doing it: always have a personalized approach by giving clients several payment options. 

When agreeing on terms with a new or existing client, I first assess their needs. For example, I determine how many positions they are looking to hire. Then, I quote my terms — let’s say 20% of the candidate’s annual remuneration. Of this fee, 50% is paid upfront to commence the search. And they pay the remaining 50% iupon a successful hire. This final payment could be due when the contract is signed or when the candidate starts work.
It's important to tailor your services depending on the client and their needs. If they are looking to hire 10x people, I suggest asking for a payment upfront to show their commitment to hiring, engage, and cover any recruitment fees, etc. 
I usually give the client some options to show that this would be the best scenario for both sides. It ensures the recruiter will be paid at least 50% of the fee for their time if the role does not end in a successful hire or the client changes direction. It also creates a buy-in from the client side to hire as they have invested in the process already – plus, it doesn't cost them anything extra. 
Here is an example of some options I’ve recently sent to an existing client when they asked me to work on some new positions:

Option 1 - Day Rate
Day rate of €580 per day
We can cap the days so I do not work more than €5,000 per month (or whatever budget you set)

Option 2 - Retained/Fixed Fee
Fixed fee with 50% of the fee invoiced to commence the search, and the remaining 50% invoiced upon a successful hire start date
For standard roles (Junior-Mid level) €5,000 per hire
For senior/manager level hires €7,500 per hire

Option 3 - Contingency %
20% of the candidates' annual remuneration (any role/seniority).
They had a limited budget but urgently needed to fill several key positions in their team. We decided to re-negotiate our agreement as we had previously worked on both Option 1 and Option 3, but felt neither were the right fit for both sides. Option 1 was becoming more costly for the client, and Option 3 did not work for me as they often switched priority of their most urgent positions, meaning much of the work I did wouldn't result in a successful hire, or would take a longer time than preferred for both sides. 

{{Gabrielle Seaton}}

Staying open to negotiation shows your clients you care about them and helps build a stronger relationship. When you already have an established base of regulars, asking for an upfront payment can be pretty straightforward. But what if you’re just getting started? 

How to convince clients to pay upfront

Even if you're a small business working towards a stable client base, agreeing to unfavourable and unsafe terms should be a no go. Here are some tactics you can implement to start charging upfront: 

• Build trust and credibility. This is quite obvious — clients are more willing to pay upfront if they trust your business. To achieve that, maintain a solid online presence via your website, LinkedIn, Facebook, or expert networks. Make sure to post case studies, reviews, and testimonials. 

If you have old clients and want to switch to upfront payments, notify them at least a month in advance — this way you can keep your relationship transparent and maintain trust.

• Discuss payment terms from the get-go. Outline your expectations during your first meeting or discovery call/chat and provide prospects with payment options. This will set the tone for future collaborations and filter out those who are not actually ready to commit. ‍
• Provide incentives. Whether it’s a first-time client or a regular, adding an incentive is a win-win. For instance, it can be a small discount of 3%-15% if your services are paid for in advance. You could even create several payment options — the earlier and the more they pay, the higher the discount. 
• ‍Create a detailed contract. 

Once I settle on the specifics, I make sure to document the payment terms in my contract. The contract clause includes:
– When the payment is due
– The amount due (whether it’s a full or partial payment). For partial payments, when the remainder is due—and on what terms
– When and how the payment qualifies for a credit or refund
– How payment is accepted (direct deposit, check, credit card, online payment, etc.)

{{Essea Fayangcao}}

Even a simple contract is better than none — not only does it protect your work but it can also motivate your clients to pay upfront. There are many free templates online you can use to draft your own contract.

You can find clauses to put on your contracts in online resources such as Law Insider or Gavel.io. 

Most customers try to avoid upfront payments because they’re worried they won’t get their money back if the work isn’t done up to their standard. A good contract will detail all the circumstances when a refund is necessary, protecting both parties. 

• Make it easy to pay you upfront. Of course, you can prepare an email template you will send to all your clients. However, there are many invoicing software options that set up automatic reminders. 

Investing in invoicing software can significantly reduce the administrative burden. 

Even if you haven’t positioned yourself as a reliable service provider yet, charging a small deposit can be a good start. Asking for upfront payments is a standard business practice. Show your clients you’re trustworthy and provide all the tools necessary to make the process as clear and simple as possible. By charging in advance, you’ll be able to concentrate on delivering great results instead of chasing payments.  

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