What's the standard for this? Milestones? Charge-by-feature? Get paid for every X hours of work? Contracts to guarantee the project completion?
Also, have any of you taken stock options as part of freelance work? Is this common?
When I have a new customer, I tell her that I will send an invoice after a few (10-20) hours of work. She will learn very early what results I can produce in those few hours and whether she likes working with me. I learn very early about her the willingness to pay. I then do my invoicing based on the results of that first test.
Usually I invoice my customers once per month. Some only, if they 'used' 50+ hours. It is all about trust. One customer wants an detailed explanation for every hour in the invoice, so I invoice often. Makes it way more easy for me to get my money. Another customer is very relaxed and just pays what I tell him. I invoice him twice a year.
About stock options: No clue about how common this is. I got the offer to buy after some month of work with a client. Another gave me shares as a present after 8 years happy hacking.. but I never asked for any stock options. Although I guess I should have done so. I would never work for shares only. I have currently one project where they pay me less than usual but I got many shares. But this project is more about fun than about money.
The split can be 30-30-40, 25-25-50 or what ever the client is comfortable with at whatever milestones they are comfortable with.
If however, the spec is evolving and fluid opt for a weekly/monthly payment schedule for the hours you put in.
When I'm working on an ongoing project where the requirements are evolving, I simply track hours and usually bill twice a month. Using Freshbooks it's easy to do this and keep track of everything and get the invoices sent in a professional manner. I create an invoice, and date it for either the 15th or 30th and then just add to it until that date, then send it.
I've found that most clients do prefer detailed records of what it is that they're paying for, so over time I've just made it my habit to record this carefully for them.
I would also stay away from stock options unless you LOVE and BELIEVE in the company and their leadership. Keep in mind, you cannot pay your rent or buy food with stock options, so that is a very speculative way to accept compensation.