Today was my first seminar on the Four Critical Principles to Surviving a Recession (click here to read a short article about the Four Principles). And I was very pleased how it turned out. It was a smaller crowd than I expected, but the discussions were open and lively. And I think every one that attended learned something new from it.
The lesson I personally learned was the subtle, but significant difference between "Deposits" and "Retainers". Specifically, while discussing how to increase cash flow, I had suggested the idea of getting deposits for future work or even going into a retainer agreement with clients. The truth is, I hadn't really given the difference between the two terms a whole lot of thought. I understood that retainers implied a "hold of time" for the client, but had really thought much more about it, except that some professionals, like lawyers, accountants and coaches liked to work on "Retainer" while contractors tended to work with "Deposits".
The truth is that the two items have a very strong difference when it comes to "refundability" in the eyes of the court (in many instances). Now, don't get me wrong - I'm not a lawyer and even if I was, I wouldn't give legal advice through a blog. But I found the difference between the two words quite interesting and wanted to share it with you.
As it turns out, both terms are used for pre-payments of service. But, what I hadn't realized is that it is somewhat accepted that when it comes to "refundability", Deposits are considered to be refundable for services "not" rendered, whereas Retainers are not.
The reason for the difference is because it is considered that when you put someone on "retainer", they are setting aside specific time to provide services to you - time that cannot not be committed to any other client (you own that time). If you choose not to use that time, that is your fault - not the professional's fault. And thus there is no obligation of refund. However, when it comes to deposits, there is no implied guarantee of the professional setting aside time for you to do the work, and thus cancellation (unless specifically annotated is usually considered refundable).
Thanks to all that came to the Seminar.