Unlocking Freelancer Success: Managing the Risky World of Web3 with Smart Invoice
tl;dr
Freelancers operating in Web3 encounter a myriad of unique challenges, including payment uncertainties, security vulnerabilities, and the absence of traditional safety nets. Smart Invoice is a powerful solution to navigate these complexities effectively.
- Seamless Security: Smart Invoice offers freelancers secure and transparent transaction environments. It provides essential services, such as escrow and arbitration. These features mitigate the inherent risks associated with Web3 transactions.
- Earning Trust: In the world of freelancing, trust is paramount. Smart Invoice empowers freelancers to build rapport with their clients through milestone-based payments.
- Risk Mitigation: Freelancers often find themselves exposed to a range of financial uncertainties. Smart Invoice introduces a “safety valve” feature that reassures clients, but keeps freelancers in control until the end of the project.
- Effortless Compliance: Staying compliant with tax reporting and accounting standards can be a daunting task for freelancers. Smart Invoice simplifies this process, making it easier for freelancers to generate printable invoices encompassing all the necessary data.
- Transparent Record-Keeping: Smart Invoice does not just facilitate secure transactions; it also offers record-keeping capabilities. Freelancers can access a detailed history of their invoices, providing them with valuable peace of mind and simplifying their bookkeeping processes.
By adopting Smart Invoice, freelancers can effectively manage the unique challenges of the Web3 landscape, ensuring they get paid on time, maintain strong client relationships, and keep their financial stability intact. #Web3 #Freelancing #RiskManagement
The Risky Reality of New Work
Freelancing is a risky business — manage your exposure.
The main difference between small to medium enterprises (SMEs) and freelancers is the scalability. A company almost automatically leads to the assumption that the venture employs multiple individuals and has more than one client. For freelancers the reality looks very different. Those solopreneurs seldomly employ another person, usually have one main client at a time, and are acting without a corporate veil to limit liability.
All in all, freelancers are exponentially more vulnerable than business owners, because they are left with safeguarding their liquidity thresholds and cash flow as any other entrepreneur while living outside the business frameworks providing a safety net from health insurance to business networks.
Naturally, freelancer must take greater care in managing their personal risk and financial bottlenecks. Ideally freelancers are paid in advance to ensure appropriate cash flow and reserves. At the same time, clients are reluctant to pay in advance as they themselves aim at managing their risk of non-delivery.
In other contexts, such as purchases of real estate or mergers and acquisitions, the contracting parties agree on a trusted third party for escrowing the funds during the transaction. Additionally, they may stipulate arbitration provisions in the contract to minimise risk for the transaction landing before a judge.
For freelancers, the sums involved are usually too small to justify the enormous transaction costs caused by using the legal infrastructure required for escrowed and arbitrated transactions. Instead, freelancers trade off certainty at a premium against risk. The risk of freelancers in Web3, however, increases exponentially because the pseudonymity of crypto addresses maximise the cost of potential recuperation to the full project cost. In other words, contracting parties in Web3 cannot expect to recoup any lost funds.
Prudent freelancing in Web3
Web3 exposes freelancers to additional risk factors. If you set out to become a freelancer in Web3, you should manage these risks prudently with the right tooling and following best practices.
First, it is best to build longterm relationships with clients. Perhaps you know someone already active in Web3, who can guide you and connect you to trustworthy clients. You could also join a DAO. Ultimately you have to find your own path.
Second, do not trust but verify. Verify the contracts you are interacting with. Check whether the networks and layer twos you are transacting on are trustworthy and reputable. If you work without receiving an advance on your invoice, ensure that the payment history of your client matches your risk tolerance.
Third, stage your addresses and never keep too many funds in the wallet you are using for daily interactions on Discord, or even for receiving funds. Both exposes you to correlation risks, as well as open attack vectors for compromising your secret key and phishing attacks.
Lastly, use tools that allow you to minimise your risk. Smart Invoice enables you to meet compliance requirements for tax reporting and bookkeeping. If you want to get paid on time and ensure that the client has the funds to pay you, make sure they deposit in a Smart Invoice before you commence your work. Do not drag your project out for too long because this increases the chances your invoice will go into arbitration or emptied after the safety valve passed.
Use Smart Invoice and get paid.
The team behind Smart Invoice knows from firsthand experience what it means to be a freelancer in Web3. We use our experience to fine tune Smart Invoice to mitigate default risk and provide arbitration with low barriers to entry. To get started just follow four easy steps.
- Specify the project details.
- Insert amounts and payment details.
- Sign the transaction and share the invoice with a client.
- Get paid on time!
By having the project details, the funds, and your invoice in one place you enjoy full control over your engagement. You do not need an account. The funds are under your control at any time. If something goes wrong, arbitration limits your downside risk.
Risk Mitigation with Smart Invoice
There is a plethora of tools you can use to streamline your cashflow in Web3. Smart Invoice is one of them and is particularly suited to formalise your contract work with larger institutions. The asymmetry we have touched on above is particularly disadvantageous to you as a freelancer because corporate entities usually employ proper risk mitigation practices you cannot afford.
Escrow and arbitration service
Except Smart Invoice offers arbitration, escrow, and records keeping as a standalone suite that is cost-effective and easy to use. Simply follow the steps below and be on the safe side of doing business in Web3.
Compliance and client relations
Organisations in Web3 usually require concisely defined scopes, verify payees’ credentials including their wallet address, and hesitate to send out funds in advance. Using the milestone feature in combination with client-only deposits, you can leverage your risk management processes to get paid during the project phase and have clients worry less about who will be receiving the funds.
If clients do desire to have more leeway for funding invoices or even wish to prolong the project, Smart Invoice provides them with all they need. You can just add a milestone to the invoice, and they can enable non-client deposits, which safeguards that anyone can fund your invoice and you stay in control of the payment schedule.
Arbitration and invoice export
Sometimes your project just does not go in the way you wanted, and you are faced with the difficult decision to pull the plug and not get any funds, or continue working and risking to do it for free. Our partnership with LexDAO as an arbitrator on Smart Invoice has you worry no more. Together we ensure that both you and your client can freeze amounts at any time. A neutral but trusted third party will then for a small fee find a fair solution that resolves the conflict and eventually award funds to either or both of you.
In case your clients now worry that they will not see the money anymore anyway, you can reassure them that they can withdraw any remaining balance after the date of the safety valve release. Our safety valve feature prevents funds from being locked in a smart invoice. Once the safety valve date has passed, even the arbitrator cannot stop withdrawals. Thus, Smart Invoice creates an equilibrium of your control over the funds and sufficient safeguards for the client.
With Smart Invoice there is no ambiguity or doubt. We guarantee transparency and paper trails to the level of detail and formats required by accounting professionals. Is your project settled and funds released, get yourself a PDF copy of your invoice and file it for safekeeping.
Conclusions
Freelance work is risky but offers high rewards. Although, you do not need to build a start-up to contribute successfully in Web3, a corporate structure and proper risk management policies do help you staying afloat. Whether you are just starting out, or have decades of experience, Smart Invoice helps you keeping friction and risk low. After all your business processes must keep your clients happy and your cashflow stable.
We are available on Ethereum Mainnet, Gnosis Chain, and Polygon.
To find out more visit us on Twitter, at smartinvoice.xyz, or join our Discord.
