9 steps to a bulletproof retainer relationship (and a bonus)

Predicting cash flow can be one of the most difficult aspects of being a freelancer. When there are plenty of jobs flowing in, cash flow is easy. But keeping a steady flow of paid invoice templates isn’t always possible.

What’s another option for consistent, predictable revenue? A retainer.

How does a retainer fee work and what is a retainer agreement?

A retainer means that a client pays in advance to ensure your services covered in the scope of work template are available for an extended time. A client can make recurring monthly payments or pay a lump sum upfront. This can be in exchange for a long-term project or regular access to services.

As freelance blogger Linsey Knerl states, “…retainer agreements are a dream come true for freelancers. Being able to say, ‘I work on retainer’ proves that you’ve gotten some work as a freelancer, and that you can expect a least one source of income each month to balance out your wages.”

The steady cash flow from a retainer helps make sure you can cover expenses, which don’t change from month to month.

Retainers can help you and your business by:

• Ensuring steady cash flow
• Securing long-term client relationships
• Covering ongoing project costs
• Providing predictable income

• Providing stability.
• Reducing the pressure to win new projects all the time.
• Allowing you to build a relationship with a client.
• Giving some consistency to your work, rather than having different clients every month.

Here are 9 key points to understand how a retainer works for you and your clients:

Earned retainer fees vs. unearned retainer fees

Understanding earned retainer fees

Earned retainer fees are payments fully earned by delivering agreed-upon services. Once the work matching the retainer is completed, the fee becomes income and cannot be refunded. For example, if a graphic designer charges a $1,000 monthly retainer for ongoing branding work and completes all tasks that month, the $1,000 is earned.

Tracking earned retainers accurately is crucial for financial reporting and tax purposes. Using invoicing software like HelloBonsai or QuickBooks can help you mark retainers as earned once the service milestones are met. This clarity prevents confusion about what funds are truly income versus prepaid amounts.

To manage earned retainers effectively, communicate clearly with clients about what work the retainer covers and update invoices or contracts to reflect completed services. This transparency builds trust and ensures your accounting remains straightforward.

What unearned retainer fees mean for freelancers

Unearned retainer fees are payments received before any work is performed. These fees act as deposits or prepaid amounts that the freelancer or business holds until services are rendered. For instance, a web developer might collect a $2,000 retainer upfront to secure availability but only recognize it as income once the project starts.

Accounting for unearned retainers requires treating them as liabilities on your balance sheet until earned. This distinction is crucial for accurate tax reporting in 2024. Tools like FreshBooks and Xero let you categorize retainers properly to avoid overstating income prematurely.

To handle unearned retainers, set clear contract terms specifying refund policies and service delivery timelines. This approach protects both parties and clarifies when fees transition from unearned to earned status, helping you maintain healthy cash flow and compliance.

How to manage retainer fees for better financial control

Managing earned and unearned retainer fees effectively starts with clear contracts that define payment schedules and service expectations. Specify when a retainer is considered earned and outline refund conditions to avoid disputes. For example, a consulting contract might state that monthly retainers are earned at the end of each billing cycle.

Use accounting software that supports retainer tracking, such as HelloBonsai or QuickBooks, to separate earned income from liabilities. Regularly reconcile your accounts to ensure financial statements reflect the true status of retainer fees, essential for tax filings in 2024.

Finally, communicate regularly with clients about retainer status and service progress. Proactive updates help maintain trust and reduce confusion about payments. By following these steps, freelancers and small businesses can maintain better financial control and avoid common pitfalls related to retainer fees.

Examples of retainer fees and agreements

How monthly retainer fees work for freelance graphic designers

Monthly retainer fees for freelance graphic designers typically involve clients paying a fixed amount upfront to secure a set number of hours or deliverables each month. For example, a designer might charge $1,000 per month to provide up to 15 hours of design work, including logo updates, social media graphics, and marketing materials. This arrangement guarantees availability and prioritizes the client’s projects.

Designers often use contracts specifying what the retainer covers and how additional work is billed. If the client requires more than the agreed hours, the designer can charge an hourly rate, such as $75 per hour. Tools like Bonsai’s contract templates help freelancers clearly outline these terms, reducing misunderstandings and ensuring smooth collaboration.

To implement this, freelancers should track hours diligently using time-tracking apps like Toggl or Harvest. Clear communication about deliverables and deadlines within the retainer agreement helps both parties stay aligned. Starting with a trial retainer period, such as three months, can also build trust and demonstrate value before committing long-term.

Retainer agreements in legal services for small businesses

Lawyers often use retainer fees to provide ongoing legal support for small businesses. A typical retainer might be $2,500 paid upfront for a three-month period, covering routine consultations, contract reviews, and compliance advice. This fee ensures the lawyer is available when legal questions arise without billing hourly for every interaction.

Legal retainer agreements usually specify the scope of services included and how additional work is billed. For example, if a business requires litigation services beyond the retainer, the lawyer may charge a separate hourly rate, commonly between $200 and $400 per hour. This clarity helps prevent unexpected costs and keeps the business’s legal budget predictable.

Small businesses should negotiate retainer terms based on their expected needs and cash flow. Using platforms like HelloBonsai to generate customized retainer contracts can streamline the process. Additionally, reviewing the agreement annually allows adjustments as the business grows or legal needs change.

Retainer fees in digital marketing agencies

Digital marketing agencies often charge retainer fees to manage ongoing campaigns for clients. A common model is a monthly retainer of $3,000 to $5,000 that covers services like SEO, content creation, social media management, and paid advertising. This fee provides consistent marketing efforts and regular performance reporting.

Agencies typically outline deliverables and timelines in the retainer agreement, such as publishing four blog posts per month or managing two ad campaigns. If clients request extra services, like website redesigns or additional ads, those are billed separately. Clear retainer contracts help set expectations and reduce scope creep.

To make retainer agreements effective, agencies should use project management tools like Asana or Monday.com to track tasks and deadlines. Regular check-ins and performance reviews ensure clients see the value of the retainer fee. Agencies can also offer tiered retainers with varying service levels to match different client budgets.

How to build a business case for a retainer fee

It’s not always easy to obtain work under a retainer. Freelancers may be hesitant to ask a client about a retainer, or be unable to communicate the value of a retainer to the client.

So your first step is to build your own business case for a retainer by determining what value you can provide to a client. What are the services you can provide to a client on a regular basis that will bring value to them on a regular basis?

Depending on your freelance business, retainer fee ideas include:

• Providing ongoing design updates
• Managing social media accounts
• Offering monthly consulting sessions

• A marketing campaign.
• A monitoring service.
• Email marketing.
• A package of monthly blog posts or other content management.
• Building or updating websites.

Bonsai can provide you with resources for developing a marketing pitch before you approach clients.

Clients need to be able to understand – what is a retainer fee? And they must be able to explain such a monthly fee to those who pay the bills. In most cases it’s not a fee “just in case” they need work from you; it’s a fee for a regular flow of work from you.

The incentive to the client could be that your work is discounted because you’re providing it in quantity. If you have a great freelance reputation or your work is in demand, committing your time in advance can command a premium price above your regular rates. This is a balancing act. You will have to impress the client with your unique abilities or how well you know their needs.

If you’re just starting out as a freelancer, Bonsai can help you with tips on building your freelance reputation.

How to get to know clients for retainer agreements

You know your strengths, have your value proposition figured out, and are ready with your marketing pitch. Before approaching a client, research them and their business. Figure out how you can help advance their business interests with your freelance skills.

To understand how a graphic design retainer agreement will work with a client, evaluate their current state. Check if they post regularly on social media or send email newsletters. Follow and subscribe to learn more about them. This understanding allows you to suggest improvements or take over that aspect of the business.

It’s also good to know if they have full-time employees that look after that sort of work. Could those employees better spend time on other aspects of the business if you took on that work?

Understanding the business of potential clients will make it easier for you to sell them on how a retainer agreement works and the benefits of having one with you.

Key aspects and components of a retainer agreement

Understanding the scope of work in a retainer agreement

The scope of work clearly defines the services the freelancer or business will provide under the retainer agreement. It sets expectations by specifying tasks, deliverables, and limits on the work. For example, a graphic designer might provide up to 20 hours of design work per month for a fixed retainer fee.

Defining the scope prevents misunderstandings and scope creep, where clients request extra work beyond the agreement without payment. Include examples of typical projects or services covered, such as consulting calls, monthly reports, or content creation. This clarity protects both parties and keeps the retainer manageable.

To create an effective scope of work, freelancers should list specific services and set clear boundaries. Use tools like HelloBonsai’s contract templates to structure this section professionally. Regularly review and update the scope to stay aligned with client needs and workload changes.

How retainer fees and payment terms are structured

A retainer fee is a fixed amount paid upfront or on a recurring schedule to secure ongoing services. This fee guarantees the freelancer’s availability and priority for the client. In 2024, common payment terms include monthly retainers ranging from $500 to $5,000 depending on industry and workload.

Payment terms should specify when fees are due, accepted payment methods (like ACH transfers or credit cards), and policies for late payments. For example, a freelancer might require payment within 5 days of invoice receipt and charge a 5% late fee after 15 days. Clear terms maintain cash flow and reduce disputes.

Freelancers can use invoicing tools such as QuickBooks or HelloBonsai to automate billing and reminders. Including a clause about fee adjustments or renewals after a set period, like 6 months, allows flexibility as project demands evolve.

Defining retainer duration and termination conditions

The duration of a retainer agreement sets how long the client commits to paying for services. Typical retainers last from 3 to 12 months, with automatic renewal options. Defining this period upfront helps both parties plan resources and finances.

Termination clauses explain how either party can end the agreement early. Common conditions include providing 30 days’ written notice or terminating immediately if payment is missed. Including these terms protects freelancers from unpaid work and clients from being locked in indefinitely.

Freelancers should clearly communicate these terms and keep termination procedures simple. Using contract management platforms like HelloBonsai can streamline signing and storing agreements, making it easier to enforce terms and track renewals.

Additional components to include in a retainer agreement

Beyond scope, fees, and duration, a comprehensive retainer agreement includes confidentiality clauses, intellectual property rights, and dispute resolution methods. These protect sensitive information and clarify ownership of work produced during the retainer.

For example, a content writer might specify that all articles created belong to the client upon payment. Including a clause about how disputes will be handled, such as mediation before legal action, can save time and costs for both parties.

Freelancers can customize these components using up-to-date contract templates from platforms like HelloBonsai, which reflect 2024 legal standards. Taking time to address these details upfront builds trust and reduces potential conflicts throughout the retainer relationship.

How to sell clients on a retainer fee

Once you have your pitch ready and can articulate the value you can bring to a client, it’s time to incorporate the retainer concept into your proposals and pitches.

There are several ways you can pitch to a client how a retainer agreement works:

• Explain the ongoing support you provide beyond the initial project.
• Highlight the benefits of guaranteed availability and priority service.
• Discuss flexible payment structures to suit their needs.

• At the beginning of the relationship, when proposing to do work.
• At the close of a project, as part of client off-boarding.

In this way, you’re selling your ability to support the completed project, before you start the work, and at the conclusion of the work.

As part of an initial pitch, you can include the option for a retainer relationship at the successful conclusion of the project. When the work is complete, you will understand the client and their needs. You can support the work you just implemented, you can provide some value-add to the project, or you can tweak anything that needs to be adjusted.

The end of a project is an ideal time to transition to a retainer, as the client will also know you and the value you can bring to their business.

If you’re approaching a new client and the work doesn’t involve a project or other finite amount of work to start the relationship, offer a free trial of your services to give clients a sense of what you can do for them. Balance enticing a client with not dedicating too much time for free.

Best practices for managing retainer agreements

Clearly define the scope and terms upfront

Clearly define the scope and terms of a retainer agreement at the start to prevent misunderstandings and scope creep. Specify which services the retainer covers, how many hours or deliverables are included, and what tasks require additional fees. For example, a graphic designer might include up to 10 hours of design work per month under the retainer, with extra hours billed separately.

Include payment terms such as retainer amount, billing frequency, and refund policies. Using contract management tools like HelloBonsai or PandaDoc can help create professional agreements that clients can easily review and sign online. This upfront clarity builds trust and sets expectations for both parties.

To keep agreements effective, revisit and update terms every 6-12 months or when project needs change. This practice helps maintain alignment and ensures the retainer remains fair and relevant as your business evolves.

Track time and deliverables with precision

Accurate tracking of time and deliverables is essential to managing retainer agreements successfully. Use time-tracking apps like Toggl Track or Harvest to log hours spent on client work, ensuring you don’t exceed the retainer limits without prior approval. This transparency helps avoid disputes over billing.

Besides time, document completed deliverables and milestones clearly. For instance, if a consultant agrees to provide monthly reports under the retainer, keep a record of each report delivered and the date. This documentation supports clear communication and demonstrates value to your client.

Regularly share progress updates or timesheets with clients, ideally on a monthly basis. This proactive communication fosters trust and allows clients to see how their retainer fee is being utilized, reducing surprises and improving satisfaction.

Set up automated billing and renewal reminders

Automating billing and renewal reminders simplifies retainer fee management and ensures steady cash flow. Platforms like QuickBooks, FreshBooks, or HelloBonsai allow you to schedule recurring invoices based on your retainer agreement’s payment cycle, whether monthly or quarterly.

Additionally, set up automated reminders for contract renewals or retainer reviews at least 30 days before expiration. This gives both you and your client ample time to discuss adjustments or terminate the agreement if needed. For example, a freelancer can use calendar tools integrated with invoicing software to send these notifications without manual effort.

Automation reduces administrative overhead and minimizes missed payments, helping you maintain a professional relationship and consistent income from retainer clients.

Communicate openly about changes and additional work

Open communication about changes in project scope or additional work outside the retainer is crucial. When clients request tasks beyond the agreed retainer services, discuss the impact on fees promptly. For example, if a web developer’s retainer covers maintenance but the client wants a new feature, clarify that this will incur extra charges.

Use written communication, such as emails or contract addendums, to document these changes and get client approval before proceeding. This practice prevents confusion and protects both parties legally. Tools like HelloBonsai’s contract templates can help formalize these updates efficiently.

By addressing changes early and clearly, you maintain a positive client relationship and ensure your work is compensated fairly, avoiding potential conflicts down the line.

How to structure a retainer agreement

Retainer agreements can be structured in different ways from a time management perspective. Consider how you want to work with a client before proposing a retainer relationship.

For instance, you can agree to provide an allotted amount of work each month, such as 10 blog posts per month. This way, you are billing for value and actual work completed, not time.

You can also agree to provide a certain amount of hours of work each month. In this format, it would be important to determine what happens if all the time allotted isn’t used – does the client “lose it,” or does it roll over into the next month.

And, as Entrepreneur.com points out,

“Since your client will have prepaid you for your time up to a certain amount, you need to make provision in your retainer agreement for periods when your client uses more than the time you've sold them in advance. Then you want to negotiate to bill them for the extra time you've spent rather than carrying it over to another period.”

You can also build retainer proposals with different tiers. In this scenario, you offer different levels of work with differing amounts of pay. You could have Tier 1, 2 and 3 options, which gives the client a choice rather than a “yes or no” to only one option. Remember though, that a proposal and a contract are two different things.

To summarize, retainer agreements can be structured in several different ways:

• Provide an allotted amount of work each month (e.g., 10 blog posts).
• Offer a set number of work hours per month with clear policies on unused time.
• Build tiered proposals with different levels of work and pay options.

1. Client pays a set amount each month to access a certain amount of time. Be sure to spell our what happens if the time is not used – is it “lost,” or does it carry over into the next month.
2. Client pays a set amount each month for a specific set of deliverables. The agreement spells out the additional costs if more work is required, or if an emergency arises that needs to be handled over and above the deliverables.
3. Client pays simply to have access to the freelancer. This is probably the least common contract template for freelancers, but more common for prestigious agencies or law firms. It could be possible if you are a sought-after freelancer.

A retainer agreement that works for you depends on several factors, including your services, client needs, and payment terms.

• Your business.
• Your expertise.
• Your services.
• The client’s business.
• The client’s needs.
• The relationship between you and the client.

If you’re wondering what to include in your freelance agreements, Bonsai can help.

How to establish a retainer contract

The actual contract is the nitty gritty that defines how a retainer works. Work with the client to determine what you’ll deliver every month. Be sure to clearly define that work and prevent scope creep. Being vague will not help you or the client. If you need help, Bonsai has resources for all your freelance contracts needs.

It’s also key to determine and discuss what happens if extra work is needed. If the client requires work that isn’t within the scope of the retainer, there should be a process in place so the client knows what to expect. That could be replacing other work or including an additional fee for the extra work.

And even if you aren’t charging per hour, you should be recording your time to determine the profitability of the retainer agreement. There are always ways to improve your efficiency and profitability, either with another client or when your retainer agreement is re-negotiated. Bonsai has resources to help with freelance time tracking.

As well, if you’re considering retainer relationships with more than one client, it’s important to be up front with those clients, and ensure you aren’t entering a conflict of interest situation. Working for two clients in the same industry could cause issues. In fact, often companies that hire a consultant on a retainer basis have a clause in their contract that prohibits them from working for the competition.

It’s also good practice to define deadlines for your work. Consider the following:

• Client expectations for short-notice work
• Access needs during crisis or emergency situations
• What happens if you’re busy or away from work
• Contingency plans built into the contract

• If you’re doing regular work, what are the timelines for it?
• Will you deliver on a weekly basis? Or by the end of the month? Or will you work on call?

Often clients who are paying a retainer for services expect that work be done on short notice. Or, depending on your business, the client may have a need to access you in a crisis or emergency situation, such as a website going down. What will happen if you’re busy with another client, or away from work? A contingency plan should be built into the contract.

It’s important to clearly define deadlines to ensure the client stays happy, and that you can meet expectations. You also have to consider your other clients and prospective clients when you establish deadlines on a retainer. A retainer agreement needs to work for you, your client, and any other or potential new clients you have.

Did you know that you can use Bonsai's integrated contracts software to create your very own ready-to-sign retainer agreement in less than 2 minutes?

All you have to do is to go to your Bonsai dashboard, and click on "create a contract" from the right hand side.

Now you'll have to create or choose a client and project for which you plan to draft the retainer agreement. Make sure you go with the "standard template" and then just click on "create contract".

After you go through the first 2 steps of the contract creation process, you will reach the "payment" section. This is where you can set up your retainer agreement by just clicking and selecting "a monthly rate", entering the amount and other specific details such as deposits, late fees, and contract termination.

Once done, click on continue and you will reach the final step of the contract creation process. Ensure everything looks good and click "create contract" to have your retainer agreement generated and ready to send for e-signature.

Easy, right? Now, sign up for a free trial of Bonsai and create your very own retainer agreement. Feel free to explore the rest of the integrated features such as proposals, invoices, time-tracking, and the new freelance tax add-on.

How to ensure you get paid the retainer fee

As part of the structure of the retainer agreement, how and what you get paid is an important component – especially for you! That regular cash flow we mentioned as a benefit to a retainer? It’s good to make sure it’s flowing to your business!

Understanding what a retainer fee is and how it works can help determine the payment plan. You can structure the fees you charge to have you on retainer for services in several ways:

1. A lump fee up front, perhaps for a full year of work.
2. A single, monthly payment.
3. A fee plus clearly defined additional fees for additional work.
4. A fee for simply being available, plus additional fees for completing emerging work.
5. A fee adjusted monthly according to how much work has been delivered.

Depending on the nature of your business, your client’s business, and your relationship, the retainer fee, how a retainer fee works, and the payment structure will vary. Bonsai has some great tips on invoicing clients.

How and when you get paid can vary depending on your needs and your client’s preferences. You might prefer payment up-front for an entire fiscal year. Or you might prefer regular, monthly payments. Bonsai can help you set up freelance recurring auto-payments for your retainer agreements.

Getting paid on time is essential for your business. Some ways to ensure timely payments include:

• Bill up front.
• Make it easy for clients to pay you.
• Invoice promptly (Bonsai can help you get your freelance invoices paid faster.)
• Don’t do work until you’re paid.
• Get it in writing.
  

How to budget your time with a retainer fee

You’ve got a relationship with a client, you’ve got a contract in place for a retainer, and you’ve been paid.

Now:

• Budget your time.
• Manage your workload.

It’s crucial that your time is budgeted appropriately to ensure you’re able to manage the regular work from your retained client, as well as any emergencies, if that’s built into the contract. That work needs to be handled along with work that flows in from new projects, new clients, or new proposals to ensure you have additional jobs.

Unless the retainer agreement can support your business, it’s important to make sure you don’t forget other clients. You need to structure your time to ensure you can continue to bid on other work, while still meeting the expectations of the client or clients on retainer.

If you need support along the way, there are plenty of amazing project management tools for freelancers out there.

How to report on the benefits of a retainer fee

A regular report to your client will go a long way to proving the benefits they are gaining from the retainer relationship they have with you. A monthly report for your client can showcase exactly what you did and the benefits of the work, which provides proof of why they’re paying you.

Here’s the deal: Customers always want to know what they’re getting for their money. If you’re working on a project for a client, regular progress reports are part of the project. A retainer relationship shouldn’t be any different: show the clients the value they’re getting for their money.

Depending on your freelance business and the work you provide for the client, reports could include:

• Social media engagement.
• Number of website followers.
• Sales growth.
• Number of blog post readers.
• …you get the idea.

If you’re able to benchmark your work and compare growth every month, even better. If you’ve established goals as part of the contract, progress to goals is important to describe. The reports should always show the client why they are continuing to pay you. Sign up for a free Bonsai trial to get resources on reporting.

How to review and adjust your retainer agreement

As with any kind of contract, agreement or project, it’s important to track the work, review the arrangement, and adjust as necessary.

Part of that process means tracking the work you’re actually doing, the time it takes you, and comparing that to the value of the contract. Is the work profitable? Is the retainer work taking away from other clients, or from finding new work?

Have a discussion with your client regularly, such as every six months or annually:

• Are they finding value in the contract?
• What’s missing for them?
• What’s working?
• Are they willing to provide a testimonial that you can use with other clients?

It should also be made clear to clients that the communication lines are always open. If there’s an issue, you want to hear about it immediately. You don’t want to wait for an annual review discussion to find out the client is dissatisfied and won’t be renewing the contract. That’s a worst-case scenario for you and your business.

You should include regular reviews as part of the contract. These can include a brief monthly chat and a semi-annual or annual review of the full contract.

How to bring new ideas to your retainer agreement

After securing a retainer agreement, do not become complacent. One downfall of a retainer agreement is sticking only to the agreed work. This can harm your relationship by avoiding creative new work opportunities.

As discussed in Forbes.com, a scope of work is created at the onset of a retainer agreement:

“This list of to-dos is created at a single point in time…so on the one hand, there is pressure to stick to the ‘Scope Of Work’ because no one wants to undo the agreement. On the other hand, there is pressure from the marketplace for ‘new thinking’ that may or may not include the items on the list.”

One solution to this is to include “or equivalent” in the retainer agreement. While different work will need to be discussed with the client, the “or equivalent” clause will allow you to bring forth creative ideas without being perceived as selling additional work. Since business is fluid, a retainer agreement needs some fluidity as well.

During your regular reviews with your client, be sure to suggest any new and creative initiatives that you can accomplish to add benefit to the agreement, perhaps as a replacement for work that has diminished in value since the inception of the agreement.

Final thoughts on how a retainer fee works

Securing one or more retainers for your business provides breathing room to cover expenses. Some of your work is guaranteed, and there is potential for additional work.

This article has answered questions like: What is a retainer agreement, and how does a retainer work? Working under a retainer relationship builds lasting business collaborations and helps your freelance business profit and grow.

For a range of solutions to support your business, sign up now to access Bonsai’s resources.