I learned the $35,000 way. Here’s the cheaper version for you.

Four payment policies you must have in place for your business.

It was summer. I was sitting on a bench swing with my dad, holding my one-year-old on my lap. I’d just locked down my first five-figure brand project for about $35,000. I loved the product, the direction, and one of the founders, and I remember saying to my dad that this win was “beyond my wildest dreams.”

Of course, the story doesn’t end there. That would not make for much of a post.

Things went left. Not right away, though.

First, we had some wonderful creative meetings. My team delivered on every level: I was beyond proud. The copy hit, the visuals were stunning, and our client (who comprised half of the founding team), was thrilled with all of our work.

Then it became time to pay us for our work. That’s when all of the problems began.

The other half of the founding team emerged. He presented as the business-side of the equation, and maintained he did not ever agree to spend this money with us. He did not want to pay us for any of the work we’d done, and tried to argue that the contract was invalid.

I had three contractors on this project and I wasn’t making much of a margin. I also had, like, two other clients and maybe $5,000 in my business bank account.

In short:

FAAAAAAACK.

To give you some more context, this guy kind of terrified me. He has an MBA from Harvard, and holds a very fancy CEO title. He seems like he means business, and I was only a few months into being a Business Comma Woman.

He also writes very aggressive emails, which I started getting every other day from him questioning the validity of the contract, the work we completed, and repeated unwillingness to pay us.

OK, so now for my first mistake, which you will never make now that you know this story.

Mistake #1: I did not demand any up-front payment

You need to take a deposit for any kind of work. This can look like a percentage of your fee, a month of work, whatever you think makes sense. Have a plan for how you’ll hang on to that money and refund it if the project stops a week in.

This not only protects you financially, but money leaving the bank account early signals that everyone is on the same page within the company. It’s a forcing mechanism for co-founders to be on the same page when they’re writing a check.

If you want language that you can use in your own contracts, I’m sharing that with subscribers below. Remember, I am not a lawyer! This is just a starting point.

Mistake #2: I did not require payment throughout the project

If your project goes on for months, only being paid at the beginning and the end is tough from a cash-flow perspective.

Get paid by milestone, or each month for hours worked - depending on how you structure your agreement.

Mistake #3: I had zero consequences for late payments in my contract.

This one is an easy fix; say you can (and will) stop work if payments are late, and say you’ll add interest to late payments.

The interest you can charge on late payments varies by state, and you can’t go crazy and start charging 20% a year; the law looks at that as punitive and it won’t hold up in court.

Typically, 18% annually (1.5% a month) and allowing for a grace period of about a week is sufficient.

If you want language that you can use in your own contracts, I’m sharing that with subscribers below. Remember, I am not a lawyer! This is just a starting point.

Mistake #4: I had no line in my contract about withholding deliverables until I received the final payment

I ended up doing this anyway, as a lawyer advised me that a signed contract, ongoing work and communication would hold up in court and they’d have to pay me. But it’s a good idea for you to have this explicitly stated in your contract if you are handing over any deliverables.

OK, so what happened?

After two really tense weeks (and a multi-thousand dollar hole sitting in my bank account), the client paid me.

The thing that saved me: not handing over assets until I got payment. I got bullied, cajoled, and threatened, but I didn’t hand that guy a pixel of our work until he paid me. And he finally did.

And then, in a delicious serving of schadenfreude, the business ended up going belly-up six months later due to a combination of founder disagreements, additional lawsuits, and a supply chain problem.

Whew.

So in conclusion, go update your contracts.

And remember- subscribers have access to suggested contract language as a starting point to protect you in situations like these (always run it by a lawyer!).

Business [Comma] Woman is for anyone building (or thinking about building) a business around her skills. Whatever you’re good at: accounting, tarot card reading, window washing, marketing, therapy - if it’s legal, we want you to make money at it. We focus on the stuff that gives entrepreneurs hives: getting clients, marketing services, selling services, pricing, etc. If this article resonated or was helpful, please share it!