How to Charge Customers for Services to Make Sure They Pay | 5 Best Strategies
Wondering how to charge customers for services? I’m sharing the exact strategies service providers can use to secure payment.
The more customers, the merrier, but if you’re anything like me, you want to ensure every single one of them actually pays you, especially if you do not know them (that well). As a lawyer myself who drafts contracts for service-based entrepreneurs like you, I am telling you exactly how to charge customers for services to secure full payment of your hard-earned cash.
You will learn everything you need to know about how to charge customers for services, and I’ll get into all kinds of service pricing strategies that could work depending on your business, so you’ll know How to charge clients as a freelancer, coach, graphic designer or any other type of service provider.
After learning all about how to charge customers for services, you will not need to worry about getting paid your hard-earned cash ever again!
This post is all about how to charge customers for services to make sure they pay you in full (and on time).
Best Tips on How to Charge Customers for Services
How to charge clients as a freelancer, coach, graphic designer or service provider
Strategy #1: Upfront payment
Depending on your pricing model (if you don’t have one yet, check out the full list of pricing models to choose from here), upfront payment might just be the best strategy for you. However, this pricing model only works if you can charge a fixed fee for your services. If you do short-term projects, like building a website or designing a logo, or provide service packages, like a 3-week coaching program or a photo shoot, then you can offer a fixed fee. In that case, one of the best options on how to charge customers for services is to have your customers pay the full amount upfront.
If they don’t pay on the date agreed (before the services start), then you simply don’t provide your services to them. No time or energy wasted. There is no risk (except for maybe having forgone other clients for that date or timeframe).
The downside, however, is that trust goes both ways. If you have already made a name for yourself or have testimonials to show how good your work is, then customers are more inclined to accept full upfront payment.
If you’re just starting out, customers may not be jumping to pay you upfront as they don’t know what they’ll get.
Strategy #2: Deposit or retainer
So, that brings me to the next one on how to charge customers for services: request a deposit or retainer. It’s a partial upfront payment that you request the client to pay before you start your services.
A deposit or retainer is a very common practice that you should not feel weird about asking, especially if it’s a new customer you’re dealing with.
Usually, it’s a percentage of the total payment, like, say, 50%.
It’s also a great strategy if you can’t because it’s a longer-term project or you simply prefer not to charge a fixed fee. You already have a rough idea of what the fees will amount to, so you can charge a deposit or retainer based on your estimate.
This is a bit riskier, though, than a full upfront payment and requires more administrative work. However, you’re ensured of at least part of the full amount, and usually, when a client is willing to pay about half of the fee upfront, they will pay the rest of the total amount as well. But, if you still want full assurance that the rest of the amount will be paid, there are some other strategies you can combine this strategy with.
Strategy #3: Milestone payments
One tip on how to charge customers for services you could combine a deposit or retainer strategy with is payment upon the achievement of milestones.
This one’s great for long-term projects. Basically, what you’re doing is breaking a project into several phases, each phase triggering a payment obligation.
There are two ways you can charge your clients with this strategy:
You could ask for upfront payment for each next phase upon completion of each milestone. You’re basically asking for multiple little deposits or retainers.
You could also ask for payment for each phase after completing a milestone. You could combine this with a larger upfront deposit before starting the project for more security.
I am not a huge fan of this strategy because there’s potential for disputes on whether a milestone has been completed or not. You need to be very clear on each milestone and have measurable metrics based on which it can be measured, and it is undisputably clear whether a milestone has been met or not.
Strategy #4: Payment before delivery
This tip on how to charge customers for services can be used when you charge a fixed fee or if you get paid hourly.
This may seem like the opposite of payment insurance, but if you are creating a tangible deliverable for your customers, like a photograph, videograph, logo, graphic design, written content, website, etc., then you can basically hold that deliverable as ransom until you get paid the full amount.
There are programs you can use, but also the simple ‘view only’ function in Google Drive so that your customers may see the final product, but they can’t actually use it.
The simple strategy on how to charge customers for services in the case of a tangible deliverable is then to give full access to the product (i.e., provide a downloadable link or password) after the client has paid you in full.
This is also one you can combine with a deposit or retainer, as you may not want to avoid the customer not paying at all if they don’t like the end product, but you have already put in all the work, especially in the case of a photo shoot.
Strategy #5: Subscription
If you provide an ongoing service that is consistent month after month, a subscription model is my best tip on how to charge customers for services.
Think of ongoing services like digital marketing, social media management, long-term coaching, and long-term freelance gigs with set hours, like in the case of a virtual assistant. These are all services for which a subscription model can work.
You can simply have your customers pay you a fixed monthly fee prior to each month of work. Just like with the fixed fee and the deposit, if the client does not pay you prior to a month, you simply don’t deliver the work.
Additional tips when customers are paying upfront for services
Now, I have shared all my strategies for how to charge customers for services.
I have a few extra pointers for you when using any of these strategies to really make sure your client pays on time.
Tip #1: Use clear contracts
As I have emphasized with the milestone payment method, it is crucial that you clearly specify in your contract when your customer must pay you.
I’ve seen too many contracts that are too unclear on (1) what triggers a payment obligation and (2) when that payment obligation needs to be met.
Your contract is the foundation of your legal rights to get paid, so you must at least get this part right.
Tip #2: Late payment fees
As an extra nudge to ensure your client pays you on time, you should always include late payment fees.
The amount you can charge for late fees depends on the country or the state your business is registered. Country/state laws determine maximum interest rates, and if you charge an interest rate higher than that, the court could rule that you get nothing at all.
So, ensure you do not charge a higher interest rate than what is allowed under the applicable law.
Tip #3: Specify the payment method
This may sound obvious, but somehow, this part is often not included in contracts. Specify the payment method your customer must use.
Do they pay you by wire transfer? Or by credit card through Stripe? Or do you use PayPal? You can also offer multiple payment options.
Also, ensure to share your bank or payment details with the customer. Usually, you’ll have that set out in your invoice.
Tip #4: Specify who pays for transaction costs
Every payment method will have its transaction costs. If you include your transaction costs in your fee, then you carry the transaction costs. In that case, specify in your contract that you carry the transaction costs. However, if it’s not included in your fee or if it is not clear which transaction costs will apply because you provide multiple payment options, then you might want to have your customer pay your transaction costs.
In that case, specify in your contract that the customer carries the transaction costs. Then, you can add the exact transaction costs to your invoice.
Tip #5: Provide detailed invoices (way in advance)
Speaking of invoices, ensure you send your customers their invoices at least a couple of days in advance, not the day the payment is due, even if you are using the subscription model or if their credit cards are charged automatically (which you also need to agree upon in your contract).
Your customers have other things on their minds and other things they need to do. It’s proper etiquette to give them enough advance notice so that they can ensure they pay you on time.
Those were all my strategies on how to charge customers for services so that you’ll get paid (on time).
Need a contract with one of these service pricing strategies?
Are you looking for a service agreement that includes some of the clauses discussed in this blog post to ensure you get paid? I sell contracts specifically curated for creators and (service-based) entrepreneurs. I have included fee and payment clauses in these contracts that work for your specific niche so you can do business with clients globally while being protected and paid (on time). The contract templates include coaching agreements, content creator agreements, social media management agreements, photography agreements, freelance agreements, and more!
Check out all my service agreements on this page of my contract shop!
This post was all about how to charge customers for services to get your hard-earned cash and never worry about getting paid (on time).
Want to find the right pricing model for your service-based business? Read this blog post on The Complete List of 15 Pricing Models for Services PLUS Guidance on the Perfect Pricing Model for You.
Want to increase the revenue you earn from your existing customers? Read this blog post on How to Increase Revenue from Existing Customers | 15 Best Tips from a Business Lawyer.
Check out all my service agreements on this page of my contract shop!
