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What needs to go into a 'terms of service' agreement?

Most freelancers -- of any profession -- learn the hard way that they have to spell out the limits on any agreement with their clients. A terms of service agreement is the easiest way to set expectations -- and limitations -- with your customers.

However, crafting a good agreement takes considerable care and effort. Here are some essentials you need to have in any terms of service agreement in order for it to be effective:

1. Your rates and billing procedures

You need to establish your expectations regarding your rates -- or you'll likely find yourself being paid less than you're due.

2. The cost of changes

Carefully explain to your clients what happens if they request changes that go beyond the original agreement. Make them aware that your time has value -- otherwise, you may find yourself working for free.

3. Interim charges and late fees

You'll always run into clients who aren't in a hurry to pay. Make it clear that any payment that is submitted by the grace period (whatever you decide that will be) will be charged additional fees and interest.

In addition, don't allow a client to carry too much of an unpaid balance at any given time. If you're involved in a lengthy project, requiring interim payments keeps your client from accruing a big balance -- and keeps you from going unpaid.

4. Ownership of the work

Who owns the work once it is completed? What does that ownership include? What happens if your client rejects the work? Do you want to retain the right to show the work as part of your portfolio? You may need to negotiate the issue on a case-by-case basis, but it should always be addressed.

5. Hours of availability

Unless you want clients to contact you at all hours (and they will), you need to set some firm boundaries. Have your hours of availability clearly included in your terms of service.

6. Termination events

An agreement about what happens should either of you choose to end your working relationship protects you and your clients. Will you be paid for work that was already finished? Will you turn over any unfinished work to the client?

It often pays to consult with an attorney who handles issues unique to small businesses when you're crafting your basic agreement. An experienced eye can often spot mistakes before they become big problems.

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