Monday, February 9, 2015

How Illustrators Get Paid

© 2015 Don Arday.
There are many types of payment arrangements an illustrator can make with a client, and a number of reasons for choosing one type over another. Although an illustrator has control over the type of payment method they require, some methods may be dictated by the type of work or circumstances of the commission. Some payment methods may be preferable over others. When establishing an illustration business, it is very important to establish a consistent payment system. A consistent system for payment will help in getting paid quicker, and it will dissuade clients from attempting to negotiate some “special” inconvenient payment arrangement.

Necessary Information

Regardless of what method of payment an illustrator will employ, there are certain pieces of information that should be predetermined by an illustrator to provide information to a client to streamline the payment process.

Payee

It may seem to be obvious that the payee will be the illustrator completing a commission, but how is that illustrator to be identified for payment?

Name Of An Individual
Payment can be made to an individual, the illustrator by his/her name, such as “Payment should be made to Don Arday”.

Name Of A Company or Pseudonym
Payment can also be made to a company, or an individual in a “doing business as” a company or a pseudonym by addressing the payment to the name of the company or entity. For instance, “Payment should be made to Arday Illustration”, or “Payment should be made to DonArtDay”. If a pseudonym or company name is used, “doing business as” forms will have to be submitted and endorsed by financial institutions in order to transact bank payments. In any case this information should be provided on an invoice.

Job Index Code
By providing the payer with a job index code, the payer will easily be able to track estimates and invoices. This is particularly critical when several projects have been commissioned to an illustrator all at once.

Payer

A payer can be an individual, a company, or an organization. A payer can be the client for whom the work was done or an entity representing that client. For example, an illustrator is hired by an advertising agency to produce an illustration for one of their clients. In this instance, the illustrator will most likely be paid by the advertising agency, however it is also possible that they may be paid directly by the agency’s client.

Purchase Orders & Job Identification Numbers
Most payers supply P.O. or Job ID numbers for each project commissioned. If not supplied, they can be requested. These numbers or codes, when included in an invoice, will greatly speed up the payment process. When a payer issues a P.O. number it essentially means that the payment has been set aside in an account and is already approved for payout. In addition to their own P.O. or Job ID number, payers will reference the illustrators Job Index code. Especially when they have issued a single P.O. for a group of projects.

Payment Systems

Many illustrators utilize more than one form of payment depending on the type of work to be produced, the length of engagement, the preferences of the client, and their familiarity with the client.

Direct Payment

Payment that comes from a payer to an illustrator in the form of a personal check or company check is considered a direct payment. These payments are usually mailed to an illustrator, thus the phrase “it’s in the mail”. It may also be possible for checks to be picked up in person. An electronic transfer from a client’s bank account into an illustrator’s bank account is another form of direct payment.

Third Party System Payment

Becoming more and more popular, third party system payments are an effective way to receive payment for work, especially with international commissions. PayPal is a popular example of this kind of payment system. Money is paid directly to an illustrator’s PayPal account. It is then made available for the illustrator to withdraw the funds. Bank check’s and USPS money orders are other forms of third party systems.

Payment Arrangements

Lump Sum Upon Completion

A lump sum payment is a single payment paid to an illustrator, usually at the completion of a commission. This kind of payment can be risky when dealing with an individual or a start up company. It is less of a risk with repeat clients and reliable companies.

Lump Sum Up Front

There are certain job circumstances where an up front lump sum payment may be necessary or most appropriate. One example being a commission for a speculative business or project, another being when a substantial amount of material outlay is required on the part of an illustrator to begin a commission.

Lump Sum By Presentation

Many illustrators bill a lump sum payment for every presentation stage of an assignment. A typical example is to require one payment for concept sketches when they are presented and another additional payment for finished illustration when it is delivered and the commission is completed. If there are other presentations such as color comps, models, etc., additional interim payments may be required.

In-Kind (In Trade) Payment

Another type of compensation is a non-monetary, in-kind trade of goods for services. Clients will sometimes offer to trade products they manufacture or sell, tickets to performances, sports events, etc. They may also offer to trade a service they can provide for one provided by an illustrator. It is also possible to negotiate an arrangement that involves a partial in-kind trade in combination with a monetary payment.

Installment Payment

Although similar to a lump sum that is split to to be billed with each presentation, an installment payment is more of a division of the total cost of a commission into a set of equally timed, equal value payments. For example, for a illustration commission costing $5000, an illustrator may require 5 payments of $1000 over a five week period. Installment payments usually involve a single commission.

Royalty Payment

A royalty arrangement might be considered as a sole payment method or as an add on. Royalties are only a lucrative form of payment when the publication or product the illustration appears on will be sold in high volume. Royalties are usually a small percentage of sales or in some cases profit from sales. As royalty arrangements are dependent on sales predictions, to some extent they are a form of gambling. 

Retainer

When a client is going to commission an illustrator on a long-term basis, for an ongoing variety of work, or for an extended series of commissions, an illustrator may prefer to set up payment by retainer. A retainer is a regularly occurring payment that is not based on a specific commission. A retainer is advantageous for clients who wish to be able to receive priority consideration from an illustrator. In essence, an illustrator is retained for work as needed and is always available.

Non-Inclusive Retainer
Retainers can work two ways. The simplest and most forward is non-inclusive retainer fee that is paid to an illustrator above and beyond any fees that may be charges for commissions completed. 

Inclusive Retainer
A more complicated form of retainer involves keeping track of the amount of retainer payment and applying it as a credit to the cost of any work commissioned. Under this form of arrangement additional fees are combined with a retainer to serve as payment in full.