Freelancing has a lengthy set of perks, including the ability to set your own hours, rates, and contract terms. The flexibility is a big plus, but there are downsides too. One of the most common hurdles is reliably securing payments from your clients. Establishing relationships with new clients takes time, and they might not want to fork over funds until they see results. In these situations, escrow services can provide an excellent compromise. Let’s takes a look at how offering escrow services can help freelancers grow their businesses.
How Does Escrow Work?
Escrow uses a trusted third party to accept and hold client payments until a contract is satisfied. First, the client submits payment to the escrow company. When the the funds are in escrow, you can start working on the project. Once the clients accepts delivery of the goods and services, they give the escrow provider permission to release the payment. The escrow service takes a small fee in return for their services, and they typically offer some kind of mediation service in the event there is a dispute.
Benefits of Escrow
This arrangement provides benefits for both parties. The freelancer knows the client has the money in hand, so they don’t have to worry about late or non payments. Conversely, the client knows the freelancer won’t run off with the money, and they also have protection in the event the freelancer doesn’t live up to the terms of the deal.
Escrow brings a lot of transparity to the client-contractor relationship. Your contract is spelled out in clear terms and listed with the escrow provider, so everyone is on the same page as far as expectations are concerned. This arrangement can help freelancers build trust with skeptical clients and avoid deadbeats who aren’t planning on paying.
Other benefits include:
Provides Protection Against Non-Payment
One of the biggest challenges freelancers face is collecting delinquent payments from clients. Utilizing an escrow service eliminate the potential for non-payments and ensures you receive payments in a timely manner.
Approach New Customers With Confidence
Clients also get to have a little more control over the project because they have to approve the work before the escrow service releases the funds. This gives the client more confidence they delivery will meet their expectations. If you’re trying to scale up to bigger corporate clients, offering escrow will make you much more credible.
Clients Pay Nothing
Using an escrow service is free for clients because the freelancer pays the service fee. You can include the no-cost escrow intoy your sales pitch, and it will make you appear more professional and trustworthy.
Disputes
In the event of a disagreement, escrow includes dispute services to resolve the issue in a fair manner. Clients typically file a dispute when they’re unsatisfied with the work. They might not want the freelancer to make changes before they release the funds. Freelancers can also file a complaint if the client refuses to approve the work or asks for an inordinate number of revisions.
Disputes typically result in a mediation between the two parties. The escrow provider reviews both sides of the argument and tried to get both parties to agree on a resolution. With Upwork, if the client fails to respond the dispute is automatically decided in your favor. If a resolution cannot be agreed upon, the dispute may need to move forward into arbitration.
Best Escrow Services
Using an escrow service is a great way to ensure that you get paid on your projects and it also helps you appear more professional and credible. These escrow services are great options for freelancers looking to add this option to their offerings.
Escrow.com
Escrow.com is an excellent escrow service that facilitates transactions for multiple industries. It’s
free to sign up, and you only pay a 3.25% fee ($10 minimum) on transactions up to $5,000. The service also integrates easily with other platforms, so it’s a great choice for buying and selling just about anything. You can learn more about their payment structure here.
Upwork Direct Contracts
Upwork recently launched a service where you can use their escrow services for outside clients without paying the full 20% fee. Freelancers only pay a 3.4% flat fee on payments, and your client doesn’t need an Upwork account to use it. Learn more here.
Bookkeeping for Freelancers
Another common challenge for freelancers is maintaining their books. Bookkeeping is one of the most important aspects of running your own business. It is important to make sure you are balancing your books and paying your bills, but also to make sure you are staying on top of your invoicing. The most important thing about your bookkeeping is that it gets done. Failure to maintain your books can make it difficult to stay on top of your bills, keep track of cash flows, and even make preparing and filing your taxes more of a chore than it needs to be. If you need help with your books, Shared Economy is here to help. We specialize in bookkeeping and tax services for freelancers and independent contractors. Schedule a strategy session today. For more tax tips subscribe to our newsletter below.