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Your business will likely use contracts to enforce promises and to build trust when dealing with other commercial parties. Contracts protect both parties to an agreement as they are legally enforceable. This means that both parties can claim compensation in court if the other party breaches a term of the agreement. You will often use a contract to secure payment for a service that has been rendered. A contract will outline the payment terms for a particular project. However, sometimes you need to secure payment before the performance of the service. This is called a down payment. This article will explain what a down payment is and how you should ask your client for one. 

What Is a Down Payment?

A down payment is an initial payment a client pays before you complete the job. Sometimes referred to as a deposit, you can use a down payment to ensure that you will actually be completing the task. This is because your client now has some skin in the game and cannot walk away from the contract. 

A down payment might also be needed to complete the project. For example, you may be completing a task that requires some initial funding. Therefore, a down payment can act as the initial funding required to start the project in question. 

How Should I Ask My Client for a Down Payment?

Professional Setting

You should first make sure that you are negotiating your contract in a professional manner. If your client can see that you have previously engaged in similar contract negotiations, they are less likely to question the need for a down payment. Indeed, the client will likely feel that providing a down payment is a necessary part of the process. 

Another way to increase professionalism during negotiation is by sending a legal letter with the terms of the arrangement. If you send a legal letter, your client may assume that providing a down payment is the industry norm and may be more inclined to provide this. 

Communication

Like completing any task with another person, ensuring that you communicate well with your client is the key to receiving a down payment for your service. You need to be able to explain why you need a down payment and how it benefits them. For example, you can explain that receiving a down payment ensures the client will not walk away from the job.

Provide Numbers

Another strategy to convince your client to provide a down payment for a service is to supply some key numbers. If your client can see why you need the down payment before you complete the task, they are likely to be more forthcoming with it. People will respond to numbers as it is a tangible reason for early payment.

Stand Firm

If a down payment is required for the service that you are providing then you should not re-negotiate this. If your client is aware that you have previously waived the need for a down payment, they will likely push you to do the same. Standing firm may mean that you lose certain clients however in the long run it is beneficial for your business as you will have set up your systems.

Key Takeaways

If you are providing a service to a client then there may be situations where you need a down payment. This may be because you are worried that your client may walk away from the job after you have completed it or you may need some initial funding to complete the task at hand. Whatever the reason is, you must have a strategy to convince your client why they should be providing a down payment. You should clearly communicate the reasons with them and offer them some numbers if they are unwilling to give you a down payment. For legal assistance with managing your contracts, contact LegalVision’s contract lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

What happens if my client refuses to make a down payment?

If your client refuses to make a down payment then you should consider whether you need their work. Otherwise, you can decide whether you are willing to complete the task without a down payment.

Are my clients legally obliged to make a down payment?

No, your clients are only legally obliged to make a down payment if they have agreed to a contract that states they must do so. 

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