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What is Escrow?

Admin
posted this on May 04, 2009 02:50 pm

Escrow Overview

Elance Escrow is a safe and efficient way to pay for work delivered online. Once a job is awarded, the client and contractor define and agree upon milestones, and funds are then placed into Escrow. Contractors can quickly and safely begin working knowing that payment is secure and will be released once work is completed, and clients are protected knowing their funds are securely held in Escrow and will only be released to the contractor when work is delivered and accepted.

Learn about the Elance Fixed Price Work Guarantee.

How Does Escrow Work?

 

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Benefits:

  • Pay Only for Results: Avoid taking risks with pre-payments and deposits.
  • Jump-Start Jobs: Contractors can immediately begin working knowing that funds are readily available.
  • Both clients and contractors are eligible for Elance Dispute Assistance in the event that a job does not go as planned. 
Note: Elance will send an Escrow Closing Statement, which provides a summary view of the escrow payments made between parties to both the client and the contractor at the completion of the job.  This statement is for information purposes only (as part of Elance's escrow compliance).  

Additional Topics

  1. Elance Fixed Price Work Guarantee
  2. Using Escrow to Fund a Job and Pay Your Contractor

As a Contractor, How Do I Use Elance Escrow?

Elance Escrow is an integral part of the Elance Online Work System, and is the safe and convenient way to get paid for work delivered.

When clients and providers are engaged on an Elance Escrow job, they work together at the beginning of a job to define the job timeline, scope and key milestones.  The use of Elance Escrow as the job’s payment method enables both parties to tie all job payments directly to the deliverables defined in the job timeline.

Please Note:  Escrow is not available for hourly jobs.

Working with Terms & Milestones

After the Client awards the Escrow job, you will automatically be notified if the job is awarded to you.  You can either accept the default Terms (with the amount and dates inherited from the proposal) or update the job’s Terms and Milestones. 

For Escrow jobs, milestones prompt clients to deposit funds into the Escrow account and release payment when work is delivered.  If you require clients to submit an initial deposit to begin work on a job, the deposit amount should be the first job milestone.

Requesting Milestone Funding and Release of Funds 

For Escrow jobs, we will automatically send a request to the client to fund the first milestone so that you can begin work, and we will send you a notification when the client funds a job milestone.  Remember, you are not obligated to begin work until at least one milestone is funded by the client.

As the job progresses and milestones are met, you can request that your client fund other job milestones.  To request funding, go to the job Workroom, click ‘Billing’ and click ‘Request not sent’ for the milestone you want funded.  We will send your request to your client.

When you have completed the services related to a job milestone, you can request the release of funds held in Escrow. For more information on how to request the release of funds held in escrow, click here.

If the client is satisfied that the services have been provided in accordance with the job terms for the milestone, they can release the funds from the Escrow account to your Elance account. When you request a milestone release, the client will receive a notification. You will also receive a notification when the client approves a milestone release.

 

As a Contractor, How Do I Request the Release of Funds in Escrow?

Once a contractor has completed a job milestone, they can request the release of funds held in escrow for that milestone.  To do so, please log into your account and follow these steps: 

  1. Click on Manage tab in the top navigation bar and then select Billing from the drop down list
  2. Select the job that you want to request release of funds and click Next.
  3. Click the Request Release button next to the milestone.
  4. The current week's Status Report will be shown and the chosen milestone will automatically be marked as 100% complete and added to the Billing section.
  5. Enter any comments for the client if desired.
  6. Click the green Submit button.

Alternatively, the contractor may also request the release of funds held in escrow by submitting a Status Report and marking the milestone as 100% complete.  To do so, please log into your account and follow these steps:

  1. Click on the Home icon from the top navigation bar
  2. On the right side of the appropriate job, click the Select Action > Status Reports link.
  3. Next, click the Create link
  4. Mark the milestone as 100% complete and click the Add to Billing box.  The amount of the milestone will be added to the billing section at the bottom of the status report.
  5. Add comments for your client if desired.
  6. Click the green Submit button.

 The status report will sent to your client immediately .

 

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When the contractor marks the milestone as 100% complete on the Status Report, not only is the completion of the milestone documented creating an important audit trail, the system automatically creates a pro-forma invoice for the contractor to save time.  Once the client releases the milestone, a final invoice is automatically created.

How do I remove or void a release request?

As a contractor, you do have the ability to void a previously sent release request.  To do so, please log into your account and follow these steps: 

  1. Click on the Get Paid tab in the top navigation bar.
  2. Click on Billing tab.
  3. From the Billing List, click on the view link for the release request that you wish to void.
  4. Click on the Void button in the upper right corner of the page.


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Why Does My Fund Escrow Status Show ‘Pending’?

Elance allows clients to use credit cards that have not been authenticated to initiate funding of the initial milestone.  In this case, the escrow milestone will appear as ‘Pending’ to the contractor. These funds in escrow are not available for release until the authentication process by the client is completed.

The status of the milestone will automatically update to ‘Funded’ when the client completes the authentication process.

Elance encourages clients to complete the authentication process in a timely manner since the contractors are not obligated to start working until the milestone is funded.    

How Are Funds Released From Escrow?

Once the contractor completes the work and requests payment for a milestone, the client has 15 days to review the work and either approve the release of funds from escrow or dispute the request.  If no action is taken by day 15, the payment is marked as "Overdue" and a reminder is sent to both parties.  If the client has still not made payment 30 days after the release request, funds held in escrow are released to the contractor.  Elance will send multiple notifications alerting the client that the 30 day deadline is nearing.

 

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Using Escrow to Fund a Job and Pay Your Contractor

 
After you award a job and negotiate terms with your contractor, it’s time to fund Escrow. This signals to the contractor that funds are available for the job and gets the work started. If you have set up more than one milestone for your job, you’ll want to fund Escrow for the first milestone at a minimum, and optionally fund additional milestones.  Escrow is only available for Fixed Price jobs.  

Once the milestone has been completed, the contractor will submit a status report with the completed milestone added to the billing section of the report.  The status report will serve as a pro-forma invoice.  If you are satisfied with the work, you have 15 days to release the funds before the payment is marked as "Overdue".  If you are not satisfied with the services from your contractor or if they did not meet the requirements of your Job Agreement, do not approve the release of any milestones.

To request the refund of funds still held in Escrow, you can adjust the terms by deleting or reducing a milestone.  If the contractor approves, the funds in escrow will be returned to the original payment source. If the contractor does not agree to a terms change, you will need to file a Dispute. To learn more about the Dispute Assistance process, click here.  

Funding Milestones

To fund a job milestone, log in to your Elance account and follow the steps below:

  1. Click the Manage tab in the top navigation bar and then select Payments from the drop down list
  2. Next, click on the Make Payment link located on the second row of the navigation bar.
  3. Select the radio button to the left of the job name you want to fund and click Next.
  4. On the Payments page, click Fund for your particular milestone.  Fund is located in the 'Escrow Funding and Release' section of the page.
  5. Select your payment method and check the box.
  6. Select the Submit Funds button.

The contractor will receive a notification when you fund job milestones.  Remember, the contractor is not obligated to begin work until at least one job milestone has been funded by the client.

Approving and Paying for Completed Milestones

The contractor will submit status reports when a milestone has been completed.  If you are satisfied with the work, you should release the funds in escrow for the completed milestone.  To release a payment for a job milestone, log in to your Elance account and follow the steps below:

  1. Click the Manage tab in the top navigation bar and then select Payments from the drop down list
  2. Next, click on the Make Payment link located on the second row of the navigation bar.
  3. Select the radio button to the left of the job name you want to make a payment for and click the Next button.
  4. On the Payments page, in the 'Escrow Funding and Release' section, click the Release button for your particular milestone.
  5. Check the box that you acknowledge Elance's Billing & Payment Service Policy.
  6. Select the Release button.

Note: Funds in escrow will be released to the contractor 30 days after the contractor has requested release.  If you are not satisfied with the services from your contractor or if they did not meet the requirements of your Job Agreement, you will need to either adjust the terms of the job or file a Dispute to stop the funds from being released.   To request Dispute Assistance, click here.

How Do I Stop the Release of Funds in Escrow?

If you and your contractor agree that a milestone should not be released yet even though a previous release request has been submitted, you have a few options: 

  • Request that contractor void the release request.  Once this process has been completed by your contractor, the previous release request will be nullified and the funds will not be released. When the milestone is complete, the contractor will need to request release again by submitting a status report.   
  • File a dispute.

Filing Dispute

If you and your contractor do not agree to resolve the issue by having the contractor void the release request and you are not satisfied with the quality of the work, you will want to file a dispute. You may initiate the Dispute Resolution process by following the steps below: 

  1. Log in to your account.
  2. Click the Home tab from the top navigation bar.
  3. Click the appropriate job name 
  4. On the left menu, click More …  and then the Refund, Cancel or Dispute link.
  5. Select the File a Request button.
  6. Complete the Dispute Form and click the green Submit form.
For more information about the Dispute Assistance process, click here. 


What is a Dormant Escrow Account?

If an Escrow account has a balance but has had no activity for sixty (60) consecutive days after the last milestone date specified in the Terms, the Escrow account is considered to be “Dormant”.

Any of the following actions qualify as “activity”:

  • Terms change request or acceptance
  • Escrow funding request
  • Escrow funding
  • Escrow release request
  • Escrow release
  • Escrow refund
  • Job cancellation request
  • Timesheet submittal
  • Status Report submittal
  • Any action under the Dispute Resolution Process

Balances in a Dormant Escrow Account are subject to the following rules:

  • Elance will notify the Client by their registered email address when Escrow Accounts become dormant.
  • If no activity has occurred, other than release requests, within seven (7) days after the Dormant Date, Elance will notify the Contractor by their registered email address that the Escrow Account is dormant.
  • If no activity, other than release requests, has occurred within a further seven (7) days (fourteen (14) days from the Dormant Date), the following will apply:

1.  Milestones with release requests that are thirty (30) days or older shall be immediately released to the Contractor.
2.  Milestones with release requests younger than thirty (30) days shall be released to the Contractor in thirty (30) days from the date of the applicable release request.
3.  Milestones with no prior release requests will be immediately released to the Client.  

Note: All releases from Dormant Escrow Accounts shall be subject to the applicable Elance Service Fees and Payment Processing Fees described in the User Agreement.

For more information, please review General Escrow Instructions.

Still have questions? Contact us..

 

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