Think about your balance sheet in your firm. Do you have debtors or accounts receivable?
Do people owe you money right now?
If the answer is yes – why?
Back in 1996 when I started my own firm, I priced based on the hour and was way too cheap. I would finish the work, write up an itemized bill, send it to the client and keep my fingers crossed they would pay up.
Sometimes they did pay. Sometimes they paid me but very slowly, 1 or 2 months later. Sometimes I didn’t get paid at all.
Cash-flow became a constant issue for me in my business. I was always chasing money, especially when times were tough.
That’s a crazy way to run a business, and I know I’m not alone in this.
We need to change the way we get paid.
Payment terms are part of pricing. When we present a price to a client, we have factored in the scope of the work, but we also need to factor in the payment terms very carefully – it’s all a part of pricing.
One of the biggest mistakes in the profession is getting paid in arrears. They do the work, send the bill afterwards and hope to get paid.
Many years ago, I was doing a speaking session about payment systems. The senior partner of a multi-partner firm came up to me in the break afterwards and said:
“When we do our audits and have our final meeting with the client, we pick up the check as part of that meeting.”
The check he was picking up was for the previous year’s audit.
I thought this was astonishing! The check was 365 days late, but that was just how they did things. Some larger firms are even worse at this.
We are in the service industry.
In the service industry, the norm is to get paid in advance, or at least on completion.
If you take your car to a garage for some repairs, they take the car in, do the work and repair your car. Then when you come to pick up the keys, you have to pay the bill before they will hand them over.
You must get your payment before you complete the work – or even better, get the payment before you even start the work.
The reality is, people don’t have a problem with paying your bill up front because it is normal in the service industry.
You need to think about your payment terms very carefully.
I strongly suggest you aim to not have any people on your balance sheet owing you money.
Imagine what a difference it would make to your business, and to your life, if that money that was owed to you was actually in your pocket. It can make a big difference.
As part of your pricing, you need to consider the payment terms and make them clear to the client.
When you get paid up front, you will find some big benefits:
- Improves your cash-flow
- Eliminates cash collection and gives you your time back
- Eliminates bad debts, where clients don’t pay up and you have to write money off
- Recurring payments create predictable cash-flows for your firm
- Having already been paid, you can focus on delivering value to your clients
Think of payment terms as an integral part of pricing, and if you are currently being paid after the work is finished, change that – get paid upfront.
I’ll be teaching you how to have that conversation with your client and make sure you get paid upfront for the work you do in the upcoming webinar I’m doing for Insightful Accountant, The Foundations of Value Pricing: How to get better prices on Thursday, April 1, 2021 – 12 Noon Eastern (11:00 AM Central) …
Click here to find out more information about that training: REGISTER HERE
The Foundations of Value Pricing: How to get better prices
Thursday, April 1, 2021 – 12 Noon Eastern (11:00 AM Central)
Webinar length: 90-minutes (1.5 hours)
CPE Credits: 1.5 CPE
Cost: $99.00
Refund Policy: Non-refundable
Connect with me on LinkedIn as well and I’ll send you some free resources! You’ll find me here: https://www.linkedin.com/in/markwickersham1/