How do you review contracts to ensure financial protection as a contractor?

Business & Financial Management for Contractors
1

After getting burned by unclear payment terms and scope creep, I’ve started to be more cautious with contracts.

What key clauses do you focus on when reviewing them? I’m particularly interested in payment schedules and handling project changes.

2

Look for payment terms and how changes are handled. Clear contracts save trouble later.

3

Same here - learned this lesson the expensive way.

I always include a kill fee clause now. Covers you when clients bail mid-project or completely pivot. Already saved my butt twice.

I demand 50% upfront on anything over $2000 and break it into milestones. Net 15 is standard, though I’ll go Net 30 for clients I’ve worked with before.

Scope creep will destroy you. I throw in a clause that bills any extra work at my hourly rate. Got burned once when a simple website turned into a full rebrand - never again.

4

Been there with scope creep - it’s brutal. Here’s what I actually check now:

  • Late payment penalties - most people skip this but it works. I charge 1.5% monthly on overdue invoices. People pay fast when it costs them real money.

  • Termination terms - spell out what happens when someone bails. Who owns completed work, what gets delivered, how final payment works.

  • Revision limits - I cap revisions at 3 rounds. After that it’s billable. Stops endless tweaking.

One thing that saved me: adding a clause about communication delays. Client goes dark for 2+ weeks? I pause the project and invoice for completed work.

Also adjust payment terms by project size. Jobs under $1000 get full payment upfront. Bigger projects get chunked but I never start without 30% down.

5

Two things that’ll save your ass: lien rights and personal guarantees. Make sure your contract lets you file a lien if they don’t pay. On bigger jobs, get the owner to personally guarantee payment. Companies fold but people still owe you. Include language about materials and work if payment stops. You own everything until final payment clears. I’ve literally pulled copper and fixtures when checks bounced.

6

I just get half up front and the rest when done.

7

Payment schedules are everything. I skip the net 30 stuff and ask for actual calendar dates like payment due March 15th.

For changes, my contract requires written approval before I touch any extra work. Saves me from but we talked about this arguments later.