Setting up an Escrow Account for your Freelancing Business: A Step-by-step Guide

In the world of freelancing, trust and security are important. As a freelancer, have you ever encountered a client who paid you lower than your agreed price or a client who ended up not paying at all? You may not have experienced this personally, but trust me, many freelancers have. 

The digital age has made it easier to connect with prospective clients from different parts of the world, but at the same time, it has also introduced its share of dilemmas when it comes to ensuring you get paid for your diligent work. This is where an escrow account can be a crunch point for your freelancing business.

In this article, we’ll discuss everything you need to know about an escrow account for your freelancing business.

What is an Escrow Account?

An escrow account is an authentic software tool for securing payments and building trust between freelancers and clients. An escrow account has always been a common way of securing payments in real estate transactions, but it somehow made it into the freelancing business world.

To simplify this, consider an escrow account as the third party holding funds on freelancing platforms until your work is completed and delivered to a client. This means when you get a project on, for instance, Upwork or Fiverr, the client you’re working on the project for must have funded their escrow account. 

On completion of the entire project or completion of milestones (if you’re being paid per milestone), the payment will be transferred to your PayPal account or any other integrated account. An escrow account also ensures you get the work done that way, and your client is at ease knowing full well payments will only be made to you once you complete your job.

Why You Need an Escrow Account as a Freelancer

1. Safety and protection

As a freelancer, you’re bound to meet clients who may not fully trust you with upfront payments. By using an Escrow account, your client will feel more confident that you’re committed to delivering quality work, and you, in turn, feel more secure knowing your payments will be released to you upon completion of your job. Think of an escrow account as an extra layer of protection, much like the 2-factor authentication system.

Read also: Top 6 Payment Gateways for any Business Owner in Nigeria. 

2. Professionalism

Using an escrow account denotes professionalism. It will automatically set you apart from the myriads of freelancers available on that particular freelancing platform. 

3. Conflict resolution

As long as there’s an interaction between 2 or more parties, conflicts are bound to arise. This is not a foreign phenomenon in a client – freelancer interaction. So whenever disputes occur between you and your client regarding the work you delivered, an escrow account can serve as a financial mediator.

How to Set up an Escrow Account for your Freelancing Business

1. Choose an escrow service provider

You can start by selecting a reliable escrow service provider. Several established platforms cater to freelancers, such as Escrow.com, Freelancer.com’s Milestone Payments, and Upwork’s Escrow system. Research these options to find the one that aligns best with your freelancing business.

2. Create an account

Sign up for an account once you’ve chosen your preferred escrow service. This involves providing details such as your name, address, contact, etc. and banking details. Ensure your chosen platform complies with international policies and offers secure payment processing.

3. Agree on terms with your client

Before initiating any escrow transaction, clearly define the terms of your agreement with your client. This should include project milestones, deadlines, deliverables, and the total project cost. Ensure you and your client are on the same page and have a written contract outlining these details.

Read also: 4 Best Ways To Create an Appealing First Impression on Your Client.

4. Initiate the escrow transaction

Once you’ve reached a requited agreement with your client, it’s time to initiate the escrow transaction. This often involves specifying the amount to be held in escrow and the conditions to be met for the funds to be released. This step is usually done through the escrow platform’s interface.

Join our WhatsApp community to network with professionals in different fields who can be of help to you. 

5. Begin your work

With the escrow transaction in place, you can courageously start working on your project. Always make sure you interact with your client update him/her on your progress, and meet the deadlines or milestones agreed-upon.

6. Milestone completion and payment release

As you reach each milestone, notify your client and request that they release the corresponding funds from the escrow account. This is usually done through the escrow platform, and your client can confirm their satisfaction with the work before releasing the payment.

7. Completion and final payment release

Upon completing the project, request your client to release the remaining funds from the escrow account. Ensure that all work has been delivered according to the agreed-upon terms before doing so. Once the client approves, the funds are released to your account.

8. Review the escrow process

After completing a project using the escrow system, review the process with your client. Ask for feedback on their experience to ensure that both parties are satisfied. This builds trust and helps you improve your future freelancing transactions.

Read also: 8 Soft Skills You Need for Successful Freelancing. 

Conclusion

Setting up an escrow account for your freelancing business is essential. It gives you and your client peace of mind, enabling you to focus on delivering high-quality work. In case of any disputes, an escrow can facilitate a smoother resolution process for both parties involved.

By adhering to the steps highlighted in this article, you’re bound to develop a reputable and professional payment procedure that contributes to the success of your freelancing business.

Oluwanifemi Akintomide edited this article. 

Subscribe to our newsletter to receive more updates that will help you grow as a freelancer. 

About Author

Chidinma Enujioke

Latest entries

• Business InsightsFebruary 26, 2024What You Need to Know About Financial Modeling as a Business Owner
• FreelancingSeptember 6, 2023Setting up an Escrow Account for your Freelancing Business: A Step-by-step Guide
• LifestyleAugust 4, 202310 Famous Paintings With Hidden Meanings That Will Wow You
• Business InsightsJune 14, 2023How to Conduct SWOT Analysis For Your Business