Contracts, Invoicing, and Business Admin

The $5,000 Handshake

In the previous lesson, we explored scope creep, conflicts, and difficult clients. Now let’s build on that foundation. A freelance designer agreed to a $5,000 website project over email. No contract. The client seemed great. They shook hands (metaphorically) and started working.

Three weeks in, the client’s “partner” appeared with completely different ideas. The scope doubled. The client said, “Well, we never agreed on exactly what was included.” Revisions went from 2 rounds to 7. When the designer finally delivered, the client paid $3,000 and said, “That’s what the website was worth.”

No contract meant no recourse. No defined scope meant no way to prove what was agreed. No payment terms meant no leverage.

The boring paperwork isn’t boring when it saves you from situations like this.

What You’ll Learn

By the end of this lesson, you’ll create freelance contracts that protect your interests, build an invoicing system that gets you paid on time, and set up the business admin systems that keep you organized as you grow.

From Client Management to Business Systems

In Lessons 5 and 6, you learned to manage client relationships and handle difficult situations. This lesson gives you the infrastructure that makes those interactions easier: contracts that set clear expectations upfront, invoices that get processed without chasing, and systems that keep your business running smoothly.

Freelance Contracts

What Every Contract Needs

Creating Contracts with AI

Important disclaimer: AI-generated contracts are starting points, not legal documents. Have a lawyer review your master contract template at least once. Then use AI to customize it per project.

Create a freelance contract template for a [project type].

Include sections for:
1. Parties (freelancer and client)
2. Scope of work (specific deliverables)
3. Timeline (milestones and deadlines)
4. Payment terms (amount, schedule, method, late fees)
5. Revisions (number included, additional revision rate)
6. Intellectual property (ownership transfers upon final payment)
7. Confidentiality
8. Cancellation/kill fee (25% of remaining balance)
9. Liability limitation
10. Dispute resolution

Project details:
- Service: [what you're delivering]
- Price: [total amount]
- Timeline: [duration]
- Payment schedule: [when payments are due]
- Revisions: [how many included]

Write in clear, plain language. Not legalese.

Quick Check

Do you currently use a contract for every project, including small ones? If not, start today. Even a simple one-page agreement is dramatically better than nothing. The Client Service Terms Generator skill can help you create one in minutes.

Contract Clauses Worth Knowing

Kill fee clause: If the client cancels mid-project, you receive compensation for work done plus a percentage (typically 25-50%) of the remaining balance.

“If Client terminates this agreement before completion, Client shall pay for all work completed plus 25% of the remaining project fee as a cancellation fee.”

Late payment clause: Automatic fees for overdue invoices.

“Invoices are due within 14 days of issue. A late fee of 1.5% per month will be applied to overdue balances. Work will be paused on accounts 14+ days overdue.”

Revision clause: Defines what counts as a revision and limits the number included.

“This project includes 2 rounds of revisions. A revision round consists of consolidated feedback provided within 7 days of delivery. Additional revision rounds are available at $[X] per round.”

IP transfer clause: Ownership of the work transfers to the client upon final payment.

“All intellectual property rights transfer to Client upon receipt of final payment. Until final payment is received, Freelancer retains all rights to the work.”

Invoicing That Gets You Paid

Invoice Essentials

Every invoice should include:

• Your business name and contact info
• Client’s business name and contact info
• Invoice number (sequential: INV-001, INV-002…)
• Invoice date and due date
• Project name/description
• Line items with amounts
• Total due
• Payment method (bank transfer, PayPal, Stripe link)
• Payment terms (Net 14, Net 30, etc.)
• Late fee notice

Invoice Timing

Key principle: Invoice the same day you reach a milestone. Don’t wait. Delays in sending invoices lead to delays in receiving payment.

Making Invoices Easy to Pay

The harder it is to pay you, the longer it takes. Reduce friction:

• Include a payment link. Stripe, PayPal, or a similar one-click payment option.
• Multiple payment methods. Some clients prefer bank transfer; others prefer credit card.
• Clear due date. “Due within 14 days” with the specific date.
• Attach as PDF. Some accounting systems need a PDF to process payment.

Follow-Up System

Automate your payment follow-ups:

Use the Invoice Chaser skill to generate follow-up emails at each stage.

Business Admin Systems

Project Tracking

You need to know at a glance:

• What projects are active
• What stage each project is in
• When the next milestone/deadline is
• What payments are outstanding
• What communications are pending

This doesn’t require expensive tools. A simple spreadsheet works:

Financial Tracking

Track your money. At minimum:

• Income by client (who’s paying you)
• Income by month (are you growing?)
• Outstanding invoices (who owes you)
• Expenses by category (what are you spending on)
• Tax set-aside (are you saving enough for taxes)

AI prompt for financial setup:

Help me set up a freelance financial tracking system.

My business:
- Average monthly income: $[X]
- Tax rate: [X]%
- Major expense categories: [list]
- Number of active clients: [X]

Create:
1. A monthly income/expense tracking template
2. A quarterly tax estimate calculation
3. An outstanding invoice tracker
4. Key financial metrics I should review monthly

Document Organization

Every client gets a folder:

Clients/
├── [Client Name]/
│   ├── Contract.pdf
│   ├── Proposal.pdf
│   ├── Invoices/
│   │   ├── INV-001.pdf
│   │   └── INV-002.pdf
│   ├── Deliverables/
│   │   ├── v1/
│   │   └── v2-final/
│   └── Communications/
│       └── [key emails saved]

This takes 2 minutes to set up per client and saves hours of searching later.

Quick Check

Can you find the contract for your last completed project in under 30 seconds? If not, your document organization needs work. Start with the folder structure above for your next project.

The Freelance Business Checklist

Essential business infrastructure:

• Master contract template (reviewed by a lawyer)
• Invoice template with your branding
• Payment follow-up system (automated reminders)
• Project tracking system (spreadsheet or tool)
• Financial tracking (income, expenses, tax set-aside)
• Document organization (client folders)
• Tax calendar (quarterly estimated payments)
• Insurance (professional liability, if applicable)
• Business bank account (separate from personal)

Exercise: Set Up Your Business Infrastructure

Complete these tasks:

1. Create your master contract template using the AI prompt above (then get it reviewed by a lawyer before using it)
2. Create or update your invoice template with all essential elements
3. Set up a client project tracking spreadsheet
4. Create the folder structure for your current clients

These are one-time investments that pay off on every project.

Key Takeaways

• Contracts protect both parties – use one for every project, no matter how small
• Include kill fee, late payment, revision limits, and IP transfer clauses
• Invoice immediately upon reaching milestones – delays in sending mean delays in payment
• Make invoices easy to pay: include payment links, clear due dates, and multiple methods
• Track projects, finances, and documents systematically from day one
• The business infrastructure you build now saves countless hours of chaos later

Next lesson: the capstone. Pull everything together into your complete freelance AI workflow.