What Is the Difference Between a Down Payment and an Estimate?
<p><em>When you start as a freelancer or a self-employed worker, you become responsible for looking for new clients and invoicing. Consequently, you must save a few hours weekly for your administrative tasks and monitor them closely to avoid any mistakes. Today, we will discuss three different terms related to invoicing: the estimate, the down payment, and the contract of services.</em></p> <p><em>To summarise it briefly, most of the time, the process starts with an estimate you send to a potential customer. Then, if the estimate is accepted, you can ask for a down payment, which is a part of the overall amount, before starting working. Finally, you must send an invoice to receive the final payment when the work is done.</em></p> <h3><strong>What is an estimate?</strong></h3> <p>An estimate is a detailed description of the work to do with the estimated prices. This document is sent before the beginning of the service and must be accepted by the client.</p> <h3><strong>What should an estimate include?</strong></h3> <p>It is recommended to be specific when creating an estimate. It is also important to include diverse elements to show the credibility of your business. An estimate should include:</p> <ul> <li> <p>The date of creation of the estimate</p> </li> <li> <p>The period of validity of the estimate</p> </li> <li> <p>The name and address of your company</p> </li> <li> <p>The name and address of the client</p> </li> <li> <p>The description and price of each element of the estimate</p> </li> <li> <p>Taxes and other fees</p> </li> </ul> <h3><strong>How to create an estimate in Momenteo?</strong></h3> <p>Momenteo allows you to create invoices and estimates. Once on the application, click on the Estimate tab and the + located top right to make a new estimate. Choose or create a new contact, and then fill in the fields like the title, expiration date, currency, taxes, quantity, and price. You can also add a short description to explain the service if needed.</p> <p>When your potential customer receives its estimate, they can decide to accept or decline it. You will then receive a confirmation email. Once your estimate is accepted, you can easily transform it into an invoice. Please note that there is no limit regarding estimates on Momenteo.</p> <h3><strong>What is a down payment?</strong></h3> <p>Let us now talk about the down payment. <a href="https://www.momenteo.com/blog/freelancers-should-you-ask-for-a-down-payment" target="_blank">A down payment </a>is a portion of the total amount. More and more self-employed workers and freelancers ask for a down payment before starting working on a project to ensure they will be paid. It also allows separating the total amount into many payments, which can be interesting if it is a big or complex project. Beware: it is vital to mention the down payments in the estimate and contract of services.</p> <h3><strong>How much should you ask regarding the down payment?</strong></h3> <p>If you are unfamiliar with down payments, you might ask yourself how much you should ask before you start working. There is also the question of the number of payments. Some ask for down payments of 25%, while others ask for 50%. There are many factors to consider, including the final amount, the duration of the project, and if it is a trustworthy client or not. Of course, asking for a down payment for a $100 invoice would not be relevant.</p> <h3><strong>How to create a down payment invoice on Momenteo?</strong></h3> <p>You can create an invoice and indicate it is a down payment by writing it in the title or the description. When making another payment or the final invoice, you only have to deduct the down payment from the total amount. </p> <h3><strong>Extra: What is a contract of services?</strong></h3> <p>We thought it would be appropriate to say a few words about <a href="https://www.momenteo.com/blog/the-importance-of-having-a-good-contract-of-services" target="_blank">contracts of services</a> since we mentioned them above. A contract of services is an essential official document for self-employed workers and freelancers because it helps manage the expectations of both parties. Nothing is left to chance; all the components of the business relationship are mentioned. It could be relevant to send the contract of services at the same time as the estimate or when it is accepted.</p> <h3><strong>What should include a contract of services?</strong></h3> <p>Contracts of services allow you to be protected from misunderstandings. It is for this reason that they often have many pages. Although a contract of service can be customized according to your needs, it should include:</p> <ul> <li> <p><strong>A precise description of the service</strong><br /> Explain what is included and what is not included, the extra fees.</p> </li> <li> <p><strong>The conduct of the service</strong><br /> Explain how you work. For example, you can mention that follow-ups will be made every week at a precise time or make a list of everything you need to start the project.</p> </li> <li> <p><strong>The terms of payment</strong><br /> Specify the amount of the service and the modalities: when and how will you be paid? Do you accept checks or bank transfers? Does the client have 15 or 30 days after the reception of the invoice to pay it? Write it down in your contract.</p> </li> </ul> <h3><strong>How to create a contract of services?</strong></h3> <p>There are many contract of service templates on the web; however, it would be essential to possess a customized document that will meet all your needs. The contract of services of a photographer is likely very different from that of a graphic designer! Regarding this, you can work with a lawyer specializing in business to have a basic contract that you can modify according to your clients’ needs.</p> <p>Do you know <a href="https://lexstart.ca/en/" target="_blank">LexStart</a>? This legal platform has guided many entrepreneurs regarding legal questions, whether it is the incorporation or the creation of a contract of services. It is also one of our partners, and you can find an exclusive offer on our Community page when you are connected to the app. Take a look! </p> <p></p> <p>In conclusion, estimates, down payments, and contracts of services must be made before you start working. We know it is a lot of documentation, but it can protect you in case of a dispute and increase your professionalism. Unfortunately, too many self-employed workers still wait a long time to receive their payment. Discover our best tips on how to<a href="https://www.momenteo.com/blog/how-to-increase-your-chances-of-being-paid-quickly" target="_blank"> increase your chances of being paid quickly</a>. Good luck! </p>