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charliearmorycom
Community Member

How do I get paid for project parts costs

 

I have searched the FAQs and forum but I have been unable to find the answer to this question.  I know many of you are programmers, in which case this question is not applicable, however the client has requested that I build a device for them.  This will incur some component costs before the project begins.

Please excuse me if I'm asking a dumb question, this will be my first project through Upwork.

 

What is the best way to bill for this?

 

Upwork takes 20% from any payment I receive, It doesn't seem fair that I should pay for part of the parts they will ultimately receive.

 

I could ask them to send the cost of the parts via PayPal outside of UpWork, but that doesn't sound fair to them (they would not receive any protection).

 

How do people usually deal with this situation?

 

I can't seem to find a way to contact technical support, since the contract has not yet begun.

 

Thanks.

 

18 REPLIES 18
g_vasilevski
Retired Team Member
Retired Team Member

Hi Charlie,

Keep in mind that asking for payments outside of Upwork is a serious violation of our TOS. One of our team members will reach out to you and assist you further. Thank you!

~ Goran
Upwork

You only have two options:

 

  1. Get the client to buy (and pay for) the parts for you and have them shipped to you.
  2. Build the price of the parts into your overall costs but yes, you'll pay the fee on the price.

Under NO circumstances must you accept any payment for any reason in any way outside the platform.

 

 

 

 

Thank you, I think I understand what you have said:

 

Either: I include the components cost in the first milestone and add an additional 20% so they pay for Upwork's fee.  And then I cannot place the parts order until the payment is received in my account (causing the client a delay).

 

Or: I give the Bill Of Materials to the client and ask them to place the orders and have them shipped to my address (doesn't this mean that they have no protection?).

 

Please let me know if I misunderstood the situation.

 

Thank you.

 


@Charlie P wrote:

Either: I include the components cost in the first milestone and add an additional 20% so they pay for Upwork's fee.


Just an advice so you don't lose money. Don't add 20%, add 25% instead.

 

Why?

 

Scenario 1: You add 20%

Say, the parts cost you $75.

You add 20%, which is $15, so you bill the client $90.

When client pays for the parts, Upwork will then take its 20% cut.

20% of $90 is $18.

So $90 less $18, you get $72.

You lost $3 right there.

 

Scenario 2: You add 25%

25% of $75 is $18.75.

So you bill $93.75

Upwork's cut (20% of $93.75) is $18.75.

$93.75 less $18.75 is $75.

You get exactly what you paid for the parts.

 

If you've earned more than $500 for the client (which means Upwork's fee is 10%) you can add 11.12%

 

Yes, now I feel dumb.  Of course percentages don't work the same way in both directions.

 

Thanks for pointing out my error.

 

prestonhunter
Community Member

re: "I could ask them to send the cost of the parts via PayPal outside of UpWork"

 

Charlie, if you did that, your Upwork account could be suspended or terminated permanently.

 

re: "How do people usually deal with this situation?"

 

I'm sorry you were not able to find information about this question. This has been discussed extensively here in the Forum. I would advise you to search for this topic in the Community Forum.

 

But as to how people deal with the situation, here is a short and simple answer:

 

- All payments go through Upwork

 

- There is an opton in the client-side interface to pay for expenses. The same fees apply when doing so

 

- As a freelancer, I can ask the client to reimburse me using that tool.

 

- OR as a freelancer, I can absorb the costs myself. I can charge enough in my fixed-rate quote or hourly rate that I can pay for the expenses and not ask the client to reimburse me.

 

- OR I can ask the client to purchase the needed items and send them to me. Most of what we're talking about are purely digital properties, anyway. So the client can purchase the software needed or the digitial content (photos, artwork, content, etc.) and send me the files or the license key.

allergywriter
Community Member

Hey!

Dont buy anything yet. I don't see where you have been awarded a job. As a newbie you are ripe to be scammed.

Make sure you have been awarded job and money is in escrow (for fixed price) before you begin work. If you are building something, the time tracker protection won't cover you because it can't see you working at your shop building something.

 

Thanks for the warning Cheryl!

So, first I calculate the parts cost (plus the appropriate Upwork percentage) and ask them to modify the fixed rate job cost to add that in?  Then I ask them to award me the job before I make any parts purchases?

 

They say they might want to add new features later in the job.  Can it be extended or do they have to create a whole new project?  If the latter, does Upwork's percentage go back to 20% or does it remain at 10%.

You said that the parts cost won't be counted by the timer tracker so I won't be covered for that?  How do I correct that situation.

Sorry about the newbie questions, for some reason I cannot find the answers to these things in the Upwork help system.  Thanks again!

Charlie:

Put all parts costs plus your fee and then add the Upwork fee and that is the amount they need to put in escrow if this is a fixed price job. Personally, I wouldn't do any type of fabrication job as an hourly job because the time tracker can't track your time and manual time isn't protected. If anyone reading this forum has experience doing fabrication work using the time tracker, please chime in and help Charlie so he doesn't get scammed.

 

If they want to add onto the job later, they can add a new milestone to the job or they can make it a new job. If they make it a new milestone, make sure you are paid for the first job before you start on the next part.

 

The Upwork fees change automatically once you cross the threshold to the next level and you will get an email letting you know. Don't change your costs calculations until you get that email saying fees for that client are reduced.

 

Be careful out there Charlie, Upwork is a great platform for connecting to new clients but it is also filled with scammers that prey on newbies like you. Just use caution until you have a feel for the place and how to protect yourself.

Thank you for your advice.  I am very new to Upwork and I appreciate that you said it's a grat platform for doing business.  I will follow your advice and do my best not to get scammed.  If you have any links to information about scams and avoiding them, I would appreciate it.

So, please tell me if this sounds right:

Hypothetically: The labor for the project is $500 and the parts will cost $75.

1. They put 583.34 (500 + 75x1.112) into escrow
2. They set the first milestone as $83.34 for start of project (to order parts)
3. They set a second milestone as $250 for confirmation via pictures/video that the device works

4. They set a third milestone as $250 upon receipt of the finished device

5. They indicate that the 1st milestone has been met
6. After $75 is transferred to my account, I order the parts
7. After I have finished the device, I send them pictures/video

8. After they confirm the device works they agree the 2nd milestone has been met

9. I mail them the device

10. They agree that the third milestone has been met

11. If they need more changes, they add aditional milestones

 

Does this sound like the way we should do it?  Any modifications to this?  Thanks.

 

 

What about the shipping charges?  I won't know the shipping to send them their equipent until the end of the job.  That means I cannot include them up front.

 

Charlie,

Yes, the client is able to fund milestones and release them as the work is delivered. Also, note that the client can edit the amount they release and either release a smaller amount and keep the remainder in Escrow or release a larger amount. This may come useful if any additional expenses or changes occur. We'd suggest discussing these details directly with the client.

You can also check out this thread for tips on avoiding suspicious jobs and to learn how to stay safe on Upwork. I hope that helps!

~Nina


@Charlie P wrote:


Hypothetically: The labor for the project is $500 and the parts will cost $75.

1. They put 583.34 (500 + 75x1.112) into escrow


 No, the fee on the first $ 500 from any one client is 20% - not 10%. It drops to 10% after $ 500 has been earned from that particular client.

 

Okay, I think I understand:

Because they are paying for parts before the labor (rather than after), the percentge will be 20%.  If I only charged them 10% I would not receive enough to buy the parts before assembly began.

Thanks.

Hi Charlie,

In general, a Fixed-Price contract is best suited for the type of job where there is a defined deliverable that the client receives at the completion of the project. If you are building something for the client which they will receive at the end of the job, it may be a good idea to suggest setting up the contract as Fixed-Price, instead of an Hourly Contract.

Hourly Contracts work really well where there isn't a defined deliverable, like where you are doing consulting or customer service for a client for instance.

As others have mentioned, you can factor the full costs into your fee that you and your client will agree on so that you are not paying out of pocket for materials. 

You can read about the differences between the two kinds of contracts here.

Milestones can be added on to a Fixed-Price contract if/when the scope of the project expands, and you should only work against milestones that have been funded in escrow. So if you and the client establish multiple milestones that you will complete over time, only work on milestones that have been backed by funds in escrow.

Definitely make sure that you have been hired on a contract on Upwork before doing any work and you can also check out this thread which has information that is very helpful to know when starting out on the platform. Please feel free to follow up with any questions.

~Nina


@Charlie P wrote:

 

Thanks for the warning Cheryl!

So, first I calculate the parts cost (plus the appropriate Upwork percentage) and ask them to modify the fixed rate job cost to add that in?  Then I ask them to award me the job before I make any parts purchases?

 

Yes. that's correct.but, First, my suggestion to you is to have this job as a fixed rate. if it's an hourly job and you enter manual hours, the client can dispute them and all those manual hours will be deleted.  Once this is a fixed rate job, and you're awarded the project, BEFORE you purchase the parts, make sure escrow is FULLY funded either for the entire job or for each milestone as they come up. Include the cost of purchasing the equipment  plus the percentage amounts.,

 

They say they might want to add new features later in the job.  Can it be extended or do they have to create a whole new project?  If the latter, does Upwork's percentage go back to 20% or does it remain at 10%.

 

The client can add a new milestone to the job. and fund it for whatever work etc you'll be doing. The client at a future date can also create a new contract. I'm pretty sure the percentage stays the same as long as you work for that specific client. I may be wrong, and if so, I hope someone will jump in and correct me.

You said that the parts cost won't be counted by the timer tracker so I won't be covered for that?  How do I correct that situation.

 

I would suggest making this a fixed cost job so that you can include those costs in your proposal. On hourly jobs, you would need to use the Tracker which takes screen shots of what you're doing. The tracker can't record purchases, or building, or research. Those hours that you do those things will be recorded in tracker as Manual hours, and the client can just dispute those hours which would then be deleted and you won't get paid for them. That's because there's no proof you were actually doing the work when you enter in manual hours, therefore the client doesn't have to pay for them if they don't want to. Remember, you need to protect yourself. There's a ton of scammers here, (not saying your client is one of them) but they are a stranger you met on the internet.

Sorry about the newbie questions, for some reason I cannot find the answers to these things in the Upwork help system.  Thanks again!


 

gilbert-phyllis
Community Member

Charlie, I get the distinct impression you are new to freelancing. If so, you are especially vulnerable here on UW until you find your feet. It's easy to get taken advantage of not only by outright scammers but also by clients who are also unfamiliar with the platform and/or disorganized and/or incompetent and/or less scrupulous than they should be.

 

My work doesn't involve making anything that can't be transmitted as a PDF. But if I were you, I would determine the cost of shipping the finished product via FedEx Ground or some other traceable method that can be estimated with some precision. I'd mark that up to cover UW's cut and build it into my fee. I would give the client a choice of having the parts shipped to me, or paying me to procure them -- so they'd pay cost plus a mark-up that covers UW's cut plus your handling costs. If they chose the latter option, then the first milestone would need to cover parts+mark-up AND be payable upon execution of the contract. Or--if it's possible for the client to pay a bonus at the beginning of the project instead of the end--it might be better to handle the parts as a bonus instead of a milestone.

 

In any case, good luck and be careful!

Just to add to the comments from Phyliss, make sure you send that final product signature required so you have proof of delivery.

 

In addition, make sure that the description of the product deliverable describes exactly how the client expects it to perform. There should be no question as to whether or not the finished product meets specifications. In other words, make specifications specific!

 

We don't mean to scare you off, we've just seen too many nice people be taken advantage of by people that aren't so nice

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