Protect Your Business from Financial Loss by Breaking Your Work into Segments

Sometimes it may seem that your business is living from contract to contract, but that's the nature of the work you do as an independent contractor or IT consultant. In addition to causing stress, the ups and downs of your workflow can cause cash flow turbulence. One way to avoid running short on cash is to segment your work. (We'll talk about cash flow problems in more detail in a later section.)

If you're about to take on a big contract, consider creating a payment / deliverables schedule. Let's say you have a two-month project, for which you'll be overhauling a client's email system, installing new security software, and setting up new computers for their office. Rather than accepting a lump sum at the end of the job, split your fee into biweekly payments based on certain milestones. For instance, you might say that after two weeks, you'll have the new email system operational, after which you'll receive one-fourth of the payment.

Segmenting your work will help keep your bank accounts more stable. Clients may be amenable because they can see a schedule of your work and know what they're getting and when. In addition, they may be more likely to make timely payments in smaller chunks.

The second benefit segmenting offers is that you'll protect yourself from clients who are unable to pay for your services.

Naturally, not all contracts can be segmented this way. If you're writing code for a client, it might not make sense to break your work into chunks. The program won't work until it's finished and having to show prototypes to your client may be more of a headache than it's worth.

Next: Who Owns the Code: Client or Developer?

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