A financial exposure limit is the maximum amount of work I allow to be outstanding for a single client at any one time, which I’ve currently set at £1500. I am happy to work on projects with a total value greater than £1500 – in these cases I break the project down into smaller parts and invoice as each one is delivered. For example, a project worth £3000 could be broken into two equal parts, which would mean that no more than £1500 would be outstanding at any one time. Or for regular work I might invoice every two weeks instead of every month.
I set this limit because I do not want to lose too much income if I stop working with a client for any reason. Although I can usually replace income, I can’t guarantee that I will be able to do this, and in any case it usually takes time. I have had a couple of occasions recently where an abrupt end to work (or the possibility thereof) resulted in a lot of stress and sleepless nights.
There some specific scenarios I have in mind when setting limits.
Refusal to pay by the client: I’ve only once had a client refuse to pay me, and that was back when I was a student and wasn’t as strict about payment terms etc. However, it’s always a risk.
Persistent late payment by the client: If a client persistently pays me late and doesn’t improve after several requests, I terminate the relationship.
Cancellation by the client: If a project is cancelled after work has been agreed.
No more work: Occasionally I’ll work with a client on a regular basis and get through everything on their task list. This isn’t a bad outcome – they’re happy that I’ve completed all the work – but it does mean that I lose the regular income.
Not respecting professional boundaries: Very rarely I’ll have a client that I no longer want to work with for reasons other than late payment – usually because they’re not respecting one of my professional boundaries, such as trying to call me outside of my working hours or having unreasonable expectations about response times (I always make these boundaries clear upfront so there’s no excuse for not respecting them).
Client financial difficulties: If a client gets into financial difficulties and can’t pay, then the concept of notice periods goes out of the window.
Where existing clients have been above the limit, I’ve got in touch to discuss the options and outline my reasoning, and they’ve been very understanding.