How do you handle the finances of a project?

1. I break estimates down to big line items: Design, kerning, hinting. More detail than that just bores and confuses busy art directors. If they need more detail they’ll ask. 

I haven’t produced a detailed quote in years because the real quote is done by the firm hiring me and shown to their client. I save detail for the contract. Spending a day or two writing a great contract after the client agrees to the prices is important. Wasting a day or two on a detailed quote just to get shot down by somebody who expected it to cost ten times less is silly.

If someone wants something that will eat up lots of time, like distressed outlines with hints, I explain up front what the work entails. So they don’t think I’m just taking them for a ride. 

2. After I work out an estimate I tack on at least 20% for unplanned stuff that inevitably comes up. This saves time getting approval to spend more when the AD has already run the project four weeks past deadline. And it makes everyone look good when the project doesn’t run up extra expenses.

In a contract I break down every stage of the project. I cap rounds of revisions at each stage. If the client starts pushing me past the 20% pad, or requests extra revisions, I start charging by the hour.

I generally ask for a quarter, third, or half up front. From there the contract is written with break points where I keep getting paid or I stop working. Clients don’t actually send out checks or electronic transfers overnight to keep the project going. And I don’t actually expect them to. But I want people to know up front that I’m not a piker who spends three months on a project and then begs for money after sending final files. If I wrap up stage 2 and the check for initial prototyping hasn’t cleared I just stop working until it does.

Until a check clears I don’t send a client any files other than PDFs with a huge DRAFT watermark and copyright notices on every page. My clients are ADs so they do the same thing to their clients. They know what it means and it reminds them to stay on top of accounting.

Don’t set up financing for clients. If they need to borrow money they can go to a bank. If they can’t get the money from a bank it’s because they probably won’t make their payments. Don’t feel bad for not helping people by working on the crazy terms they say they need. If they really need crazy terms from the designer they shouldn’t even be in business. And you shouldn’t help them dig their own hole.

In general, my formula is broken down into two parts. 1. The work itself. How many days will this take? And then charge the daily rate. There are SO many variables. A basic Latin sans is going to take way less time than a basic Latin script with texture. 2. The licensing/exclusivity. Which someone else at my company quotes on.

The videos @Thierry Blancpain posted make very good points.

As for getting paid, it varies. Overall we have wonderful clients and we don't usually require payment until the project is finished. Some clients, however, might have a complicated payment system, or international red tape to go through, and will take longer to pay. So occasionally we charge a percent up front. Some clients will negotiate a kill fee if they're not entirely sure what they need. I always always always say "changes in scope may cost extra." Scope creep is the worst. It starts with a small change here... and then another one... and then just one more. I let some slide—they are to be expected with newer clients, for example. I usually give a warning the first time "this is considered a change in scope, but we'll let it slide for now," just so the client isn't surprised later when I do charge a fee. 

I define a project as finished as when the client is satisfied. Usually I factor in 2-3 revisions in my schedule per milestone. With good, precise communication, they're usually not all needed.