Do you feel guilty asking for money up front before you start a new project?
Do you start projects in good faith after being promised “the cheque is in the mail”…only to get halfway through the work without ever receiving a penny?
In last week’s post I wrote about how you can raise your prices without alienating your customers. But setting prices is one thing – and actually collecting the money is another thing entirely.
And when you’re first starting out, it can actually feel weird to ask people for money before you work with them.
After all, you used to work in a job, where you did the work and got paid for it later. But when you’re a business owner, it’s different. Your company needs the revenue now to be able to manage cash flow. You can pay yourself whenever you choose, but your business? Your business needs to be paid, so it can pay you.
How to Implement a Payment Policy
If you’ve been random about your collections policies (some call that ‘flexible’, but that’s a load of bull), it’s time to stop. NOW. That client who complains that they have to wait for someone else to pay them first? Fire them. They don’t deserve you.
I’m serious! Okay, you don’t have to fire all of your clients, but it’s time to get strict and consistent with how and when you require money. Follow these steps:
- Decide on a payment structure that works for you, and makes sense for your industry. In my business, that’s 50% down, 25% at the midway point, and 25% on the last day of the project. (that last one is new; I used to give clients 5 business days, but too many of them never made the final payment).
- If you accept credit cards, get their credit card information at the beginning of the project. Tell them it will only be used in case of a delinquent payment.
- STOP ACCEPTING MAILED CHEQUES. We live in an age of electronic money transfers – PayPal and other services have made it pretty easy. In Canada we have the added bonus of Interac e-transfer, which is instantaneous. Don’t your clients want you to get started right away? Yes, they do. So they need to pay you right now. Today. Within the hour.
- Tell your current clients that you’re changing your payment policy. You’re doing it because it benefits them – they know exactly when they need to pay you, and that helps them manage their cash flow too. See what I did there?
- Make every new client sign off on your payment policy. If they don’t, you don’t do the work. Period.
If your policy isn’t perfect, don’t worry, and if you don’t follow it perfectly, don’t worry. Just keep practicing and you’ll build up a lot of confidence telling people when you need to be paid.
The wonderful thing about a really clear payment policy is that it usually makes people respect your time more, and take you more seriously. It helps them realize that you are a professional at this thing, so you don’t mess around with payments – either they pay for your time, or someone else will.
Do you have a clear payment policy for clients and customers? Or does part of your policy just not work the way you want it to? Share your stories and struggles in the comments. I’m happy to help out!