I own and operate a design studio and would never, under any circumstances, follow this type of process.
that's why anyone can call themselves a designer or developer but REAL professionals can charge a premium rate.
the reality is if your business sense is so bad you set yourself up to be completely screwed like this it's your fault.
Now I'm not saying we can't get screwed, I've been stiffed on payment too, but never for anything even remotely close enough to be stiffed for a whole job.
We demand 30% up front for work or on jobs over $50,000 a substantial initial deposit to establish a working relationship. if the company doesn't have the money, or isn't willing to send it? I don't want that client. To date I have never lost a contract due to this either, and our contract stipulates regular payments throughout the project based on deliverables that are split up into phases.
this is not rocket science. Using this method the only risk you run is being stiffed for the final payment after delivery.
There is also a method for charging a retainer, and on sketchy clients we do this.
the difference being, a deposit is worked off immediately. if someone sends us $3000. we do that work, then bill again. the initial deposit is considered a good faith payment to establish a working relationship.
If the deal we're working on seems risky? we charge a retainer. The same amount, but it's not worked off. That 3k remains in escrow throughout the project and is applied at the very end. it eliminates all of the risk because the initial retainer is equivalent of the proposed final billing. Since we're billing in phases we are never working in a negative environment.
The biggest problem in this industry is under qualified, unprofessional people calling themselves web developers and designers. It costs us, the professionals, in work and income but there's no way around it.
When we bid a job I tell the client up front, We are not the cheapest, but we are the best. and I believe that. It's the difference in $30 per hour and $150 per hour
but as far as being silly enough to screw myself then try to hide statements in the markup? Well, I don't think it takes much explanation to define that type of person. that's the type of stigma that gives real professionals a bad name