​​When you first start working with clients, you think the hard part is getting the client. But over time, you might realize that managing your clients is just as hard (or even harder).

The reality is that your contract can do wonders in protecting your time and cash flow.

So in this post, I’m breaking down five contract payment terms that you’ll want to check for if you want smoother client relationships without spending more time managing the relationship.

Make sure you read to the end because I’ve got a bonus strategy that is essential for protecting your time and cash flow.

You are the expert

Before we dive into the contract payment terms that will protect your time and cash flow, I want to remind you that your client is hiring you because you are the expert. 

When a client signs your contract, they’re not just agreeing to pay you. They are saying that they are buying into the process and workflow you’ve designed to get them the awesome results that you’ve shown you can get..

You are the expert. Your process is unique to you and gives you the outcome that you want for your clients. And your clients want you to guide them through your process. 

Your contract is one of the pieces necessary to guide them through that process. And a wishy-washy or vague contract doesn’t help guide them.

The fact is that most people aren’t hiring you with the hopes of getting one over on you.

The reality is clients pay late because they: 

• didn’t know when they were supposed to pay
• couldn’t find it in your contract
• forgot about it

They’re not intending to hire you and never compensate you for it. 

So your contract’s job is to make it easy, clear, and obvious how to pay you. And to explain what happens when common hiccups arise.

#1. Clear payment structure and due dates

If you want to be paid on a certain schedule, you have to make it super clear for clients to know what that schedule is.

That’s why this is #1 on the list, because a clear payment structure and due dates are the most important factors in getting paid on time.

The usual way I handle this is by having a contract cover page. This page spells out those important client details. And allows you to put those things you want the client to understand front and center.

It should outline:

• how much does your client owe
• when payments are due (ideally milestone or calendar-based)
• if and how invoicing happens
• how should payment be made

One thing I like to remind my law firm clients is that their last payment should be due when the client is still motivated to pay you, AKA before they get the last deliverable.

The final payment should be made before:

• they get the final files
• you release the website
• the license kicks in

A good payment plan doesn’t need to be complicated. It just needs to match your workflow. 

#2. Late payment penalties

We all know that even with the clearest payment plan, life still happens, and clients still will pay late.

This is a normal hiccup you should expect as an expert. And since it’s a normal hiccup, you should have a plan in place in your contract that will kick in, if/when they pay late.

Your late payment clause should explain:

• what happens if a payment is late
• that you have the option to stop working if they don’t pay

The final reminder I want to share here is that everything about your contract payment terms should go with your workflow. You need to pick something that feels fair to you, that you’ll want to enforce, and won’t add extra work to your plate.

So if you only touch invoices once a month, then don’t make your interest charge kick in after five days.

Interest amount

One thing I see done a lot in contracts is charging 10-20% monthly interest on late payments.

In every state, there are usury laws. These laws determine the maximum amount of interest that you or I, as non-bank or financial institutions, can charge. 

In California, that’s 10% a year, which works out to 0.83% a month.

And if you end up taking a client to small claims court because they didn’t pay and have a bigger number in your contract, the judge will either:

• Reduce it to the legal amount.
• Tell you that it’s too high and not give you any interest.

So your best bet is to put the maximum amount allowed by law, even if it’s not a high enough number to really discourage clients from paying late.

Stopping work

If a client stops paying you, your contract should support you in saying, “I’m not doing any more work until you pay.”

Your contract isn’t doing its job if it forces you to keep digging a bigger and bigger hole of what the client owes you.

So it should give you the option to say, I’m hitting pause until you pay your invoices.

You can be fair and kind

I also want to remind you that just because you have a late payment penalty in your contract, it doesn’t mean you have to enforce it.

Say a long-term client who has always paid on time, tells you that they are going to have to pay 5 days late.

You can be a kind business owner and waive it.

But having it in your contract gives you options. You will have the system and contract to back you up when you feel like giving them a pass. But you’ll also have it there to enforce things when you feel like someone is trying to take advantage of you.

#3. Collect a non-refundable amount upfront

You should be asking for a portion of the payment up front.

Why? Because your time is valuable. When someone books your services, you’re not just holding a spot on your calendar. You’re setting aside your brainspace, creative energy, and time, sometimes turning away from other work to do it. All things you can’t easily fill back in if they cancel.

But here’s the real kicker: if you want that upfront payment to be non-refundable, what you call it matters.

That “deposit” you’re collecting? It might not actually be doing what you think it is.

You’re not alone if you’ve ever said:

• “I ask for a deposit to reserve the spot,”
• “The deposit is non-refundable,”

This is super common language, even in some contract templates being sold to creatives.

But here’s the thing: in many states, using the word “deposit” legally means the payment must be refundable, even if you never intended it to be.

That’s right: if you call it a deposit, and the client cancels? You might be legally required to refund all or most of it, even if you’ve already started working.

That’s why I recommend a small but mighty word swap: installment.

This one word could keep hundreds of dollars in your pocket.

And back it up with the right contract language, specifically, a liquidated damages clause. That’s what allows you to keep the payment if the client cancels, because it acknowledges that you’ve reserved time and turned away other work.

It might sound like legal hair-splitting, but it will make a real difference when a client cancels and you want to keep that upfront payment.

So you should double-check your contract and:

• If it says deposit, change it to installment.
• Make sure there’s a liquidated damages clause in there to support your non-refundable policy.

Not sure what a liquidated damages clause looks like? We are covering the exact language that must be used to make it a valid liquidated damages clause in the summer workshop series.

Why this language matters

Several years ago, I had a wedding photographer book time with me. 

She had just gotten an email from the step-father of the bride requesting a full refund of the amount they had paid for her services.

The back story was that a couple of days before the wedding, the bride canceled the wedding because she found out that the groom was cheating on her with her best friend. And the step-father, who was an attorney, was pissed, and trying to get as much money back as possible.

Her contract called the payment an installment and said it was non-refundable, so she came to me to figure out how to reply to his email. Because this was just post-COVID, and she didn’t have the money to return the money to this bride.

Long story short, I read his email and her contract, and agreed with him that she probably was going to have to pay the money back.

Why? Because her contract didn’t have true liquidated damages language in it to back up the “non-refundable installment” language.

Instead, I encouraged her to hire me to tighten up her contract so that this wouldn’t happen again (and she did).

But that is the danger of not having a true liquidated damages clause when you have a savvy and sophisticated client or client family member.

#4. Plan for cancellations

Regardless of how excited the client is at the beginning of the project, budgets change, clients pivot, and sometimes that leads to cancellations.

Which is why this is another hiccup that your contract should plan for.

In most creative industries, a kill fee is completely standard. And it’s fair to everyone, because you’ve already started work. It’s not punitive.

It’s not there to scare, punish, or give you a leg up on your clients. It’s there to give you options when life happens and projects cancel.

#5. Plan for scope creep

Another very common hiccup is scope creep. So your contract should spell out:

• What’s included
• What’s not included
• How will additional work be billed

Scope creep often starts off small. It’s things like:

• “Can you just take a quick look at this?”
• “I had one more idea, shouldn’t take long.”
• “I’d love to pick your brain for a sec.”

You want to be helpful. And sometimes, you don’t mind doing a little extra. But over time, these small asks can pile up, especially when you’re not getting paid for them.

Which is why your contract should help you set and hold clear scope boundaries. These will not only keep your project on track but also protect your time.

It also helps your client know what to expect. Most clients are not trying to take advantage of you. They just don’t always know what’s included (because most of them don’t actually read your contract or can’t find what they are looking for quickly).

Bonus! Download the No-Surprises Contract Checklist

To wrap things up, I’m going to challenge you to audit your contract.

Where does your contract:

• need tweaks or refinements
• have gaps that are causing confusion
• include language that’s not clear and explicit

Want help doing this? Enter your email below to grab my No-Surprises Contract Checklist that will help you audit your contract.