The Business of Editing: You Want a Deposit!

One of the first pieces of advice new freelancers receive from more experienced freelancers is “get a deposit”! Interestingly, that advice is generally given to editors who work directly with authors; the assumption is that publishers will honor invoices just to avoid hassles but that is not always true of authors.

Rarely, if ever, discussed is the editor’s responsibilities when it comes to taking a deposit.

Commonly, the editor’s contract lays out a payment schedule, such as 25% of the estimated fee as a deposit before work begins, 25% when half of the manuscript is edited, the balance when editing is done. The variations on this theme are endless but they all begin with that prework deposit or retainer.

Retainer is really the wrong word to use. A retainer is a payment in exchange for setting aside a certain amount of time to deal with a client’s needs. It can be argued that you are entitled to keep the retainer no matter what happens because you are willing to give the client the amount of time the client is paying for. A deposit, on the other hand, is clearly refundable until it is earned.

The general practice, based on conversations I have had with colleagues who ask for deposits, is to take the client’s funds and comingle them in the editor’s regular accounts. Although this is commonly done, it is not necessarily the best idea, especially if a taxing authority comes round to do an audit.

From my perspective, the biggest problem with commingling is the ethical problem: the editor has yet to earn the deposit or any portion of it.

The idea of the deposit is to ensure that the editor receives payment for work that is done. If the editor and client have agreed on a fee of $50 per hour, then at the end of 1 hour of work, the editor is entitle to withdraw $50 from that deposit. Should the client then decide that the editor is not a good fit for her manuscript and cancel the contract, the client is entitled to a refund of the balance of the deposit — the unearned portion.

In other words, deposits, although under the immediate control of the editor, remain the property of the client until such time as some portion of it has been earned by the editor, at which point only that earned portion belongs to the editor.

What colleagues have said to me is that they do not disagree with who owns what, but see no reason why they need to segregate in a special account any deposits pending earning. All they need to do is keep good records.

Unfortunately, that is not quite true. The first problem is a tax problem. Tax codes usually take the position that any money in the editor’s account is taxable as belonging to the editor. Because most editors are on a cash basis and not an accrual basis for accounting and tax purposes (if you are on an accrual basis you should revisit this with an accountant), as soon as the editor deposits any money to a personal account, it is the editor’s for tax purposes. Consequently, if the editor’s tax year ends December 31 and the editor has unearned deposits commingled in the editor’s personal accounts, that unearned money counts as income for the preceding tax year.

The second problem occurs should some disaster befalls an editor, whether it be health-related or bankruptcy or some other financial disaster. Because the finds are not segregated, they are treated as the editor’s funds. The client’s money becomes the editor’s money — even though not yet earned by the editor — and subject to use for payment of the editor’s debts.

Included in this second problem is the not so rare instance where an editor runs short in a month because some clients have delayed payment or contested an invoice, and now some bill is due and the editor does not have enough in the bank unless the editor taps the unearned deposit. The temptation becomes great to “borrow” against the deposit because the editor expects to earn that money soon.

The third problem, and to me the biggest problem, is that by commingling the money the editor says the client should trust the editor with the client’s money even though the editor doesn’t trust the client with the editor’s money. I view trust as of necessity being mutual. Placing the money in a designated escrow or trust account alleviates much of the distrust. The client sees that the editor recognizes that the deposit belongs to the client until it is earned; the editor is affirmatively acknowledging that she must earn the deposit.

The relationship between editor and client is a business one. Everything needs to be kept at arm’s length. Editors need to treat clients as equals and with dignity. One way to do so is to recognize that until the editor earns a portion of the deposit, that deposit is held in trust for the client. The editor demonstrates acceptance of that relationship by segregating client funds from the editor’s funds and by providing a regular accounting to the client.

In the past, when I would receive deposits, the deposits not only were placed in an escrow account, but the client received a monthly report advising the client of the balance and of any transactions. (I also would send the client immediate notification saying that I had withdrawn $x as payment against a particular invoice.)

Segregating client funds from our personal funds tells clients we are professionals, that we want our relationship with the client to be a professional one, and that we are trustworthy. It helps establish a positive working relationship. And from the editor’s perspective, if the client feels assured about how the deposit is handled, there will be less reluctance to replenish the fund as the editor withdraws earnings from it.

Because the request for the deposit is generally part of the contract, what the editor does with the deposit should also be part of the contract. The contract should outline how the editor will handle the deposit and what kind and frequency of reports the client can expect to receive as regards the disposition of the funds. The contract should also state that the deposit remains the property of the client except as sums are withdrawn to pay the editor for work completed per the contract.

Do you agree that the funds should be segregated? Is that what you do?

Richard Adin, An American Editor

The Business of Editing: An Editorial Code of Professional Responsibility

Recent discussions about ethics made me realize that I have failed as an editor and writer. I meant one thing, Erin Brenner and the American Medical Writer’s Association meant something else. This became obvious in private correspondence with Erin wherein we used the same term, ethics, but meant different things. As Erin noted in our correspondence, there are two definitions of ethics: “the rules or standards governing the conduct of a person or the members of a profession” and “the study of the general nature of morals and of the specific moral choices to be made by a person; moral philosophy” (see The American Heritage Dictionary); I meant the first and she meant the second.

Why is this important? Because of the reference to the American Medical Writer’s Association’s Code of Ethics. What I see as necessary is less an abstract code of ethics than a concrete code of professional responsibility. The difference can be like that between night and day. AMWA’s is a code of ethics because it states unenforceable and undefinable ideals. To say, for example, as AMWA Principle 3 says, “Medical communicators should write, edit, or participate in the development of information that meets the highest professional standards…,” is a wonderful aspiration, but it is only an aspiration because “highest professional standards” is undefinable. Ask 25 people to spell out exactly what is meant by that aspiration and you will get many different “definitions.” In this regard, the Society for Editors and Proofreaders’ Code of Practice, is much closer to what I think is needed, although it is only closer, not quite there.

A major failing of the AMWA code, and perhaps even of the SfEP code, is the lack of interpretive, published decisions and public enforcement. In contrast to aspirational ideals, a code of professional responsibility lays out definable, graspable, and, most importantly, enforceable rules of conduct; it also usually has a body of interpretive opinions so that adherents know what is expected in defined circumstances. Enforcement means that there is a public penalty for ignoring the guidance. Think of it like a judicial opinion. A court opinion has no value if no one knows what the facts are that led to the opinion and what the parameters of the opinion are. The idea is for those bound by the code to understand their obligations and modify their behavior accordingly. It is the seeking of a behavioral consensus.

Codes of professional responsibility usually have mechanisms by which a person bound by the code can submit a scenario and receive guidance on how to behave. For example, an editor could ask: “I was told the client had a budget of $1500 and I agreed to work for $50 an hour. But the work is not complete after 30 hours. Can I just keep working and bill the client until the work is done?” and receive a guiding opinion that lays out what the correct action is under the group’s code of professional responsibility. The question and response would be published so all editors would receive the same guidance.

Assume that the response is “No, you cannot continue to bill. You knew what the budget was and by agreeing to undertake the job implied to the client that it would not take more than 30 hours to complete. It is your obligation to complete the work at your expense.” (I know there are lots of missing facts and lots of other appropriate answers. This is just for illustrative purposes) When published, other editors would see what is expected under similar circumstances and would be expected to conform their behavior in the described situation to the guidance.

More importantly, the answer would act as guidance for the client–editor interaction. If the editor ignored the decision and continued working and billed for the additional time, the client would be able to point to this decision as justification for not paying above the budget. Whether that would stand in a dispute resolution action is a different matter, but at least for widely accepted codes, such as in medicine and law, such a decision would have significant weight in the dispute resolution proceedings. The fact that there is a decision that is attuned to specific facts gives guidance to both editors and to clients. Both know what to expect and what needs to be done.

And, importantly, if properly constructed, there would be interim guidances and final guidances, with the final version not being settled until community comments were considered.

Ultimately, the question comes down to what is the advantage to having a code of professional responsibility and published guidance interpreting the code’s canons in various circumstances? The answer is that it raises the status of the profession in the minds and eyes of all interested parties. And for those who voluntarily agree to adhere to such a code and to the interpretive decisions, it gives them increased standing within the editorial and client communities. Perhaps, most importantly, it instills in clients a sense of confidence in the professionalism of the editor.

Is it difficult to create such a code? Not really. This is the type of endeavor that needs to be done by consensus. A small group of editors could easily begin by reviewing codes from various disciplines, including law and medicine. Once a basic code was created, it could be published for feedback from the editorial community. Ultimately, once adopted editors will agree to be governed by it when they see it is in their best interests. To bring such a code about is just a matter of will and interest within the editorial community. Additionally, once such a code and body of interpretations were created, it would be easy to create standardized certification courses that demonstrate ethical competency.

What do you think? Are you interested? Would you agree to be bound by such a code? (Are you ready to volunteer to start the process?) Or do you think that a code of professional responsibility is not needed for the editorial profession?

Richard Adin, An American Editor