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Client Doesn't Think They Got What They Paid For

There are consistent benchmarks of projects that go wrong. Client ghosting, unfavourable payment terms and scope creep. We look at a project that involved all three and resulted in a client feeling like they didn't get what they paid for. Could this have been avoided? How can insurance help in this situation?

18May'20

In today's Unsure? Insure! episode we share a story about a project gone wrong. This story involves the usual benchmarks of a bad project—client ghosting, unfavourable payment terms and an unwieldly project scope. Let’s dive in…

"My client was delighted with the logo I designed and asked me to update her website with the new branding. I suggested she needed a new website, but she insisted on simply updating the branding.

I quoted her for updating the website, which I said I’d add to the invoice I was going to send for the logo.

I updated the website with the new branding, but she changed her mind. She now wanted a redesign. I’d already updated the website, but I agreed to absorb the cost of this because I wanted to be nice.

The website changes she originally wanted were a little lower than what I’d charge for a deposit to design a new website. I agreed to incorporate the original quote into the cost of the new website.

After the deposit had been paid I started work on the redesign, but I stopped hearing from my client. 4 weeks later she contacted me to say she’d changed her mind about the redesign. Again.

I told her she could pay the original quote and I would refund the remaining balance of the deposit, despite it being non-refundable as per my contract.

Instead of a refund she asked if I could do a few extra pieces of work to the website instead. I ended up investing more hours than I expected into this project and I explained that I’d worked extra hours that I hadn’t billed.

Eventually we completed the project and I transferred the website to her, minus the new design because that was not paid for and she’d decided against the redesign.

I deleted the design because I believed she didn’t want it, but this week she asked for the new design because she thinks she's owed it.

My client doesn't believe she got what she paid for. In hindsight, I probably wasn’t clear about what work she should be getting and what she had paid for. I’m worried she’ll file a claim against me."

This situation can be summarised as the client feeling like they haven’t got what they paid for (which may or may not be true).

This is the most common cause of professional indemnity claims that we see at With Jack. Clients not feeling like they’ve got what they paid for can either lead to claims for loss of income, refusal to pay your invoice or demands for compensation to hire other freelancers. We’ve seen all of these situations.

Let’s take a look at where this project went wrong, and then we’ll talk about the role insurance could play in helping this freelancer.

Where things went wrong

This project didn’t get off to the best start in part due to the unfavourable payment terms. The freelancer invoiced after work had been delivered to the client. For example, the logo had been delivered and the website updated to the new branding, but the invoice hadn’t yet been issued.

Maybe there was an existing relationship in place, but invoicing after you’ve delivered work is a recipe for disaster. It can lead to non-payment or—similar to this situation—it can lead to the client changing their mind about what work they want.

A sign that problems were on the horizon was the client going off the radar once the project was underway. The freelancer didn’t hear from their client for 4 weeks, by which point the client had changed their mind about the direction they wanted to go in with the redesign.

If there were payment milestones and an initial payment had been made upfront, the freelancer could then revise the budget based on the new direction and adapt the timeframe and scope.

To ensure clients are incentivised to stay on track, consider adding a pause clause to your contract. If a client goes off the radar, you’ll put the project on hold after some time has lapsed as stated in your contract. When the client reappears, the project will be rescheduled based on your current workload and availability. This encourages clients to stick to the original timescale and not mess you around.

This freelancer mentioned absorbing costs and even doing extra work for free in a bid to be nice to their client. Doing extra work for free is an invitation to being taken advantage of. We’ve already had this client ghost the freelancer and change their mind continuously, so why does the freelancer reward that behaviour by doing extra work for free?

That’s setting an expectation that you’re open to doing more of the same—allowing them to change their mind without revising budgets and working for free. Good client relationships are important, but you can nurture those relationships whilst still running this like a business.

After the client changed their mind yet again about the redesign, the freelancer offered to refund their deposit despite their signed contract stating the deposit is non-refundable. One of the reasons we accept deposits and have these clauses in our contracts is to ensure you receive some financial compensation for the work that you’ve put into the project even if a client cancels the project or changes direction. Backing down on the terms agreed in your contract makes everything else negotiable. That’s a dangerous situation.

The scope of work should have been planned and budgeted for in advance of the project beginning, but the indecisiveness lead the freelancer to working hours that she hadn’t billed for. Whilst some projects will naturally evolve, it’s important to work with your client beforehand and establish as much of the project scope as possible. That way, if the client sees that something they want isn’t included, like the cost of updating their website with the new branding, you can amend the scope and budget and get everybody on the same page.

Lastly, the freelancer deleted the design due to the client changing their mind about the redesign. I would consider stating how long you'll hold onto client assets in your terms. This means you're better protected if a client does come back after a period of time asking for assets.

I used to be a freelance photographer and would have wedding clients approach me 5 years after photographing their wedding asking for their files. In my contract it said I would hold onto files for 3 years. After that it's their responsibility to have copies and back-ups.

How can insurance help in this situation?

We learn a lot from these projects. They teach us what red flags look like so we can avoid them in the future and the truth is that if you freelance for long enough, there will be bad apple clients or projects that don’t run smoothly (hence why you should have insurance). Let’s look at how insurance could help.

The freelancer said she’s worried her client will make a claim against her. Currently there is no claim.

The client hasn’t made a legal threat or asked for compensation or damages. Because there is no legal threat or request for damages, it wouldn’t trigger the professional indemnity policy just yet. However, it’s worth notifying the insurer that you have a client that isn’t happy if you do have an inclination that it might escalate.

The product that would be the likeliest to assist at this stage is legal expenses insurance. This is designed to provide advice and assistance from experts if there is a dispute.

The first thing I’d do in this situation is phone the legal advice helpline. This helpline is designed to provide expert advice before a problem arises. They will give you pointers on how to handle this client dispute so it doesn’t escalate into a full blown claim.

A customer can phone if they suspect they have an issue that may lead to a claim, which is what’s happening in this situation, and the helpline can provide practical advice to guide customers through a problem.

If things do escalate, the helpline can initiate the legal process and pass those details through to the claims team.

To recap, you have a better chance of avoiding this situation if:

  • You have proper payment terms instead of invoicing for work after it’s been delivered, giving the client a chance to change their mind or not pay the invoice
  • You have stricter measures for dealing with clients who ghost you or go off the radar, causing disruption to the project. Consider adding a pause clause to your contract to incentivise clients to stay on track
  • Don’t fall into the trap of absorbing costs or offering to work for free. Many clients will capitalise on this and take advantage
  • Stick to the agreed terms in your contract. If one area is compromised then the client may feel terms can be negotiated further or abused
  • Plan and budget the project scope as best as possible prior to a project kicking off, giving your client the chance to see exactly what they’re getting and make changes to the scope (and budget!) if need be prior to the project kicking off
  • Specify how long you’ll retain client files or assets for before deleting them
  • If you find yourself in an awkward situation where there is no claim, phone the legal advice helpline as part of your legal expenses insurance for practical advice to guide you through the situation
  • If things do escalate, the helpline can initiate the legal process and pass those details through to the claims team
  • If covered, they will provide legal assistance in the form of a solicitor to help you defend yourself

We asked ourselves one important question …

What do we want out of an insurance provider?

With Jack is the answer