Terms and Conditions - it is all about money.

[KennyG]

I posted a short piece a while ago about being accurate regarding what you provide to clients so there is no confusion by either party. Well, you are about to do the work, but have you agreed how and when payment will be made? These are the commercial Terms and Conditions of your business and could end your business before it has started unless you get it right.

You must have Terms and Conditions and your client must sign/accept them before you do any work. There is no maybe about this one, if you want payment for work then your clients must have no misunderstandings about your business terms.

Two words to govern your business life - CASH FLOW. You can't afford to buy an album for a new client because the last one has not paid you yet - NEGATIVE CASH FLOW, three very, very bad words. Your terms of business are designed to protect you from slipping into this oily pit.

Rule one - NO CREDIT. Accept deposits but nothing less than will cover your expenses and material costs. Get the balance the second the work is done, no extended terms. This is a business, not a charity and when it comes to money, stop being nice, nice does not get people to pry open their wallets.

So, what should your Terms and Conditions say? I have no intention of writing them for you. A business lawyer did mine and it wasn't cheap, but you can start with some simple things.

1. Payment terms - Deposits and when the balance is due.
2. Methods of payment - Cheques (checks) must clear before any work done. Set up a merchant account (not sure what that is in the US) to accept credit cards and add any surcharge the bank applies to you. Get that money into the bank before you pick up your camera.
3. Discounts - For cash only and 100% up front.
4. Refunds - No, this isn't a joke. If you make a mess of the work, give the money back, it is your fault. If they make it impossible for you to do your work, then you should either not refund or retain enough to cover all your costs.
5. Copyright - Up to you. In my work I retain all copyright and only give permission for use. You may want to charge for re-prints or other use of the same images. Don't give this away unless you have a very good reason and the payment makes it worth while.
6. Disputes - Give a fixed number of days for a complaint to be registered. Make sure you follow up any complaint, do not bury your head in the sand, they will not go away and trust me, they will come back to haunt you.

Don't forget that your terms of business should include a statement about booking dates. This is very important for wedding photographers in particular. You know your business and it is your decision how you handle this. You could allow 3 months notice of cancellation with say a 10% charge if you think you can fill the slot in that time. If you are struggling to fill slots you may want to keep a larger percentage. Whatever you decide, it should be part of your standard terms.

I could go on and add to the list, but I hope you can see the point here. Tell the client up front how/when you want payment for the work and make sure the deposit covers your costs. You will probably have to average this out and it may be that 50% deposit will normally cover your costs. Some you will win and some you will lose, but the aim is to make sure you never slip into the oily negative cash flow pit.

You can get ready made T'c and C's to adapt for your business. I have known people adapt them from copies they have had to sign themselves. However you do it, just make sure you have them. If a dispute goes to court they could save the day, or even your business.

[PhotosGuy]

Good advice, Kenny.

[robertwgross]

Once a client asked for a statement of proposed work. My partner and I talked it over, and then I sent a statement of the scope of work, and the fee amount stated, and that it was "NET 15". That means we do the work and hand the client the invoice immediately, and then the client has 15 days to pay us. For us to go ahead and start the work, we needed to see a purchase order from the client. The client kept hemming and hawing around and would not send the purchase order, yet kept demanding that we show up on a certain day. Reluctantly, we showed up to do the work, but we weren't going to start until we saw the purchase order. The client came up with one excuse after another and then accused us of wasting their time. Finally, they brought in the purchase order and we began the work. As we started, I quickly read over the fine print. In the terms, they added the phrase "2% NET 30". That means that they could wait out until almost 30 days before paying, and they would still take a 2% discount. That, in my opinion, was hitting pretty low. I should have pulled the plug on the job. The manager that pulled this stunt gave people of a certain ethnic origin a bad name.

---Bob Gross---

[pradeep1]

Terms and Conditions are critical. I have them printed on all of my invoices, quotations, etc. automatically. But I vary terms for my customers based on their history with my company. Some get net 30 days, some net 10 days, some CASH, and some get an open account which gets billed monthly like a credit card and as long as they pay what is due from the previous month, they can order as much as they want up to a certain dollar limit. Of course, I have a wholesale business selling to other businesses, so I can offer these types of terms because of the business relationships. But if you are dealing with the general public, then the caveats in this thread are useful.

Another common variation on this theme is the 2/10, net 30. Which means that if they pay you in full within 10 days, they get a 2% discount, else they have to pay 100% if they pay in 30 days. This is sometimes an incentive to certain types of people, and... ahem...ethnic groups, especially some groups that tend to own a lot of cash based businesses. I am Indian, so sometimes this works well with those types of clients. ;)

[jrobert]

The client came up with one excuse after another and then accused us of wasting their time. Finally, they brought in the purchase order and we began the work. As we started, I quickly read over the fine print. In the terms, they added the phrase "2% NET 30". That means that they could wait out until almost 30 days before paying, and they would still take a 2% discount. That, in my opinion, was hitting pretty low. I should have pulled the plug on the job. The manager that pulled this stunt gave people of a certain ethnic origin a bad name.

That was certainly an underhanded thing for them to do and you'd have been more than justified in walking. But why would you generalize that experience, with one or a couple of people, to a larger group?

-jeff-

[robertwgross]

Jeff, all of our previous dealings with that same company had been pretty straight. However, this one manager was trying to get things done within her company without proper upper management approval or signing authority. We didn't know it right at that time, but later on we discovered that this one ethnic group (within the company) was trying to run things their way, management be damned.

After we were finally paid (late, at 45 days, and with 2% discount), we were in a private meeting with higher-ups in the company, and we mildly mentioned the incident. The VP showed a grimace and then said that he was aware of the problem.

The whole culture of that company changed within a year after that.

---Bob Gross---

[jrobert]

I'm glad to hear it eventually worked out for you and you didn't end up getting stuck. Sounds like the company made some needed changes, too. I've only had one problem getting paid for my services (engineering) and, similarly, it reflected trouble within the company, not (I prefer to think) a pervasive attitude of stiffing suppliers.

-jeff-

[robertwgross]

Then there was another awkward situation. My partner traveled to Santiago, Chile, to do five days worth of work for $2000 per day, as agreed upon. At the completion of the fifth day, he submitted an invoice for $10,000 even, net 15, by wire transfer. The client company hemmed and hawed and admitted that they might not be able to pay that much.

Then they asked him if he would take only $7,000 in cash. Wow! My partner thought about it, since it would be "off the books", and then he thought about pickpockets as he would be strolling around the Miami airport terminal to make a connection. Hmmm. So, he turned down the cash. The client finally paid up about six months later, but we never did business with them again.

---Bob Gross---

[robertwgross]

I've noticed that the bigger the company, the slower the pay.

Agreed.

Bigger companies have more bureacracy.

---Bob Gross---

[cricket]

This thread really interests me.

I have never dealt with a purchase order before, but would really like to know if/when I might need one. I do business/executives along with my other portrait photography; the word has gotten out, and I am wondering if I'll ever need one...

[robertwgross]

If you tell your client that you will shoot their portrait for $50, and then you do it, and then you present the finished work to the client and they say, "I changed my mind." You are stuck. Verbal agreements don't stand up well.

On the other hand, if you furnish a scope of work statement on a big job, and you spell out what each of the deliverables are, and then you spell out your fee and the terms of payment. The client company will then issue a purchase order that normally has your scope text attached to it, so that spells out exactly what the details are. Then you deliver your work. It is a good idea to provide an invoice right then and there. Normally, the invoice mentions their purchase order number, and you have the client sign the invoice that they have received the work. Then the invoice goes to the Accounts Payable Department, and then they pay it by check with the purchase order number and/or invoice number referenced.

---Bob Gross---

[pradeep1]

Agreed.

Bigger companies have more bureacracy.

---Bob Gross---

That or they know that they represent a sizable volume of your business and that you won't raise too much of a fuss if they don't pay on time. Some of my largest customers are the slowest payers. But I wouldn't dare fuss too much. When I really need the money then and there, I call them up and let them know and they cut me a check. But given the option, they'll take 30-60 days to pay. Such is life and business.

[epeace]

What if the company doesnt have a purchase order system?

What do you do when they say "A purchase order? We dont have those. . "

Do you just have them scribble something out in MS Word with your scope attached?

[Andy_T]

You just put this as final lines on your scope of work:


Purchase order

I agree to buy the services as specified above
(signature, date, stamp)
Please fax back to ....

Best regards,
Andy

[pradeep1]

What if the company doesnt have a purchase order system?

What do you do when they say "A purchase order? We dont have those. . "

Do you just have them scribble something out in MS Word with your scope attached?

Type up an "Order Confirmation" or "Statement of Services" and list out everything in detail. Have someone who can authorize payment sign it. If it is for a large amount of money (over $2000), and you are dealing with a relatively small company, get a personal guarantee by the owner that they will honor the debt to you if they file bankruptcy for their company.

[S230]

Thanks everyone for the info. Never thought how important little details can make. Especially the discount is a great incentive for people to pay early. :)

[Atlasman]

I've been in business for more years than I can to admit—I'll now tell you a short story that hopefull will drive home a key point.

My partner and I had just started up our new company and in our first month we scored a large project with a new client—over $20,000 (probably now the equivalent of $40,000). Now before my partner and I joined forces, we had both been running separate business and both of agreed that new accounts (especially new accounts) would require a 50% retainer and the balance would become due based on a schedule of deliverables—they agreed and paid us $10,000 which we promptly deposited into our business account and when the cheque cleared, we proceed to do the work.

Well, as soon as we completed the 1st deliverable, we get a notification from the new account"s lawyers that the company had filed for bankruptcy.

As a new startup, had we not implement the retainer rule, we would have been "running on empty"—cash flow is the life blood of any business; when you have money sitting in the bank, it gives you the luxury to set the terms and pricing—and get what the market is willing to bear; when you don't, you basically become a "whore," and you set the stage for long-term struggle; because, along with not having cash flow, you have no confidence to charge the going rates.

For those who are considering to start a new business, have a safety new of a least 6 months, work out budgets and cashflow for at least a year—and stick to the plan.

Joseph

[CanonXTuser]

As we started, I quickly read over the fine print. In the terms, they added the phrase "2% NET 30". That means that they could wait out until almost 30 days before paying, and they would still take a 2% discount. That, in my opinion, was hitting pretty low. I should have pulled the plug on the job. The manager that pulled this stunt gave people of a certain ethnic origin a bad name.

---Bob Gross---


Hint: To change a key payment term and not tell you is intentionally trying to slide one by and it's not limited to just one ethnic group ... though it's always fun to guess who the usual suspects would be! ;D

So How did it turn out??? Did you walk out or finish and get paid???

[dpurslow]

Kenny, while I agree you with almost 100 % I do think for every rule this is an exception. I do some work for the BBC here in the UK. They are a public funded body and have to account for every penny spent. The BBC dont actually do their own payment, they use another company to do it for them. The process is something like this.

1. The BBC contact me giving me details of the job spec.
2. I quote for it in writhing
3. When accepted, I have to supply (EVERY TIME) Risk Assesment Docs, Insurance Docs, My BBC Contract.
4. A purchase order is raised and sent to me along with a Satisfaction report by the department in the BBC who hired me.
5. After the event is over, I have to send the Sat Doc back to the contracting person, who returns it to me.
6. I then invoice the BBC and have to enclose the PO copy, Contract Copy and Sat note.
7. Payment is raised and sent.

Typically I have to wait 3 - 4 weeks after the event for all this to take place but its worth it. The Beeb wont prepay as the sat note has to be completed, it also has compensation clauses in it, so if I dont do a good job, the Beeb can deduct payment.

The Beeb are a good client to me so I am happy to wait for the money.

[sfaust]

If you tell your client that you will shoot their portrait for $50, and then you do it, and then you present the finished work to the client and they say, "I changed my mind." You are stuck. Verbal agreements don't stand up well.

In my estimates, I have a place for the client and I to sign. However, sometimes that doesn't always work. So, there is also a clause in my estimates that basically says that if the client goes ahead and schedules the work they are agreeing to the terms and conditions in the estimate. Not as good as a written acceptance, but far better than a verbal agreement. If they have seen the estimate and go ahead with the work, they have agreed to the terms. I'll try to pull the actual verbiage the lawyer wrote out of my T&C's.

Some of my largest customers are the slowest payers. But I wouldn't dare fuss too much. When I really need the money then and there, I call them up and let them know and they cut me a check. But given the option, they'll take 30-60 days to pay. Such is life and business.

I try to handle this in a variety of ways. For new clients, I get an advance up front. Enough to cover any expenses, and some of my time. Usually 30-50%.

Once established, I will then give them limited credit, but I still require any out of pocket expenses paid up front. Normally, this is for talent, rental equipment, location fees, props, sets, etc.

For my well established clients, I'll give them credit for all invoices. But they've usually proven themselves to be credit worthy and low risk.

My biggest PIA's are the companies that from the start try to beat you down on price, ask for all rights, question terms, etc. The way I handle them painlessly, is to pass them on to my competitors :) "Sorry, I'm booked for that date, but here are a couple photographers that I'd recommend."

[Yohan Pamudji]

Just curious as a part-time photographer who hasn't done very many paying gigs: what kind of jobs do y'all do where you have these thorough contracts and complicated payment/delivery schedules? I know, I know... you'd probably say that all projects should be sealed with a contract and, I would agree. I'm just curious as to the nature of your work.

[sfaust]

For any commercial jobs, or business to business, I always get everything in writing. I try to always use my own forms, terms and conditions, and get the client to sign it. Sometimes, its not easy to do because of time constraints and/or distance between the client and I, etc. In those cases, I would use an e-mail that spells out everything we agreed upon during verbal conversations, and ask the client to reply back to confirm his acceptance. At least then I have something in writing to fall back on . I usually attach my standard terms and conditions to this as well, so those are agreed to as well.

When I deal with a retail customer, such as a portrait, I don't use any paperwork. I have a standard price list, and payment is due before I start. Payment for prints is due upon delivery. So the terms are very easy and fairly standard, and no paperwork is required.

When dealing with editorial clients, I usually have an ongoing agreement signed with the magazine, and that contract covers all jobs I do for them. Then I only need to capture any agreements regarding deliverables, start/end times, billing amount, etc. All the nitty gritty is covered in the contract. I capture everything via e-mail or fax on each assignment to cover my bases as far as what was discussed. If most of it is done by phone, I will summarize it and send it via e-mail and ask the editor to confirm. If its a troublesome client, I may send a fax and ask for a signed copy back via fax.

As for the type of gigs, mostly anything commercial, business to business, editorial, or journalism. The only exception is retail as discussed. I'm curious how others handle this as well...

[klynam]

sfaust - as an aside: wow - you're an excellent photographer...

[sfaust]

sfaust - as an aside: wow - you're an excellent photographer...

Thanks so much for that Klynam! My day has been way off, so this was a great pick me up.

[klynam]

Dude (how's that for a professional start...lol) as a 20yr veteran art director, I've worked with some very good shooters both here in Dallas and internationally. (Had several years as AD for Holiday Inn/Crowne Plaza throughout Mexico and the Carribbean.) You are definitely up with the best of them. Hope your day gets better - hey, at least it's Friday...

[sfaust]

Coming from an art director (client/peer), that really REALLY makes my day!! Thanks for the vote of confidence, greatly appreciated.

[studiotime]

thank you thank you thank you for this, kenny!i know this is already logical, but i guess sometimes (some of us) needs little reminders of this invaluable piece of info lol :)

[mscelest]

I'm a novice, does anyone have any idea about what and how to make money as a Photographer, other than in stock photos?I love Photography and want to get paid well for it.....any suggestions pls?
;)

[studiotime]

I'm a novice, does anyone have any idea about what and how to make money as a Photographer, other than in stock photos?I love Photography and want to get paid well for it.....any suggestions pls?
;)

so far, while i'm aspiring to be a fashion photographer, have been doing modelling/actor-actress photos. pays well, can even afford mua and hair stylists. and while you keep your portfolio updated you also need to know where to advertise (or announce) your work so they get word (and images) of it.

hth :)

[Stocky]

I'm a novice, does anyone have any idea about what and how to make money as a Photographer, other than in stock photos?I love Photography and want to get paid well for it.....any suggestions pls?
;)

I don't like all of their suggestions, but http://blogs.photopreneur.com/ has some interesting ideas.

[studiotime]

I don't like all of their suggestions, but http://blogs.photopreneur.com/ has some interesting ideas.

you don't have to like someone else's ideas. you just need to do what works for you, as there's a myriad of paths in photography that one can easily take.

hth

[senany23]

you're an excellent photographer...

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