If Cash is King, Why Don’t We Get Payment Up-front?


If Cash is King, Why Don’t We Get Payment Up-front?

Think of your local coffee shop, favourite restaurant, greengrocer, butcher and even your supermarket.  In every case, you have to pay for your goods on the spot.  You don’t walk out of the business with an invoice that allows you to pay them 30 days later.

Ok, so if you pay with a credit card, you may well pay a month later, but my point is that the business has been paid on the day you made your purchase.

Why provide credit?

So why then do we allow customers and clients to have credit with us?  We provide the goods or services, give them an invoice and then hope and pray that they will pay it within our 30-day terms.  In most cases, we haven’t even asked them to fill in a credit application, let alone actually done any credit checks.

By providing credit terms to your customers or clients, you are effectively providing them with a banking service.  You are allowing them to use your money (the money they should have paid you up-front) to pay other bills and then pay you later, at a time of their choosing.

Why do we do this?  The common answers are “that’s the way we’ve always done it” or “it’s standard in my industry”.  I put it to you that it doesn’t have to be that way.

An alternative solution

You have the choice on how you charge in your business.  You can choose whether you require payment up-front, whether you require a percentage up-front and the balance later, whether you won’t do xyz until payment is made in full and other options along these lines.

Professional service firms for decades would do the work, calculate the time taken and prepare the invoice and send it to the client expecting payment 30 days later.  In some cases, the work may have started a few months earlier, so that the business was paying the staff wages month in month out long before the client paid them.

I recall attending a conference where it was suggested that fixed fees were the way of the future and the majority of the attendees said it couldn’t be done, they’d lose money, lose clients and so on.

I chose to be a trailblazer and implemented fixed fees with monthly or quarterly payments over 12 months or 50% up-front before we started work and 50% on completion.  The result was a win-win situation for both the clients and my firm.

My clients loved it.  They knew exactly what the fee would be and could budget for it.  And for them the best part was that there were no surprise invoices for amounts that they didn’t expect.

For me, I loved not having to justify my fees after the event. Instead we would have a discussion before the work started and when both the client and I were happy with the amount, we then got on with doing the work.  This allowed us to concentrate on providing top quality work and exceptional customer service.

The other benefit, which was a significant benefit, was in having regular cashflow through the year.

Be a Trailblazer

I challenge you to be a trailblazer in your industry and consider how you could change the way your business operates so that you can get paid in full at the time of the sale.

You could start with a part of the business, say a particular product or service. Or you could change your business terms for new customers or clients, leaving your existing customers or clients with credit terms and invoices.

Think about what you could do differently and in doing so improve your cash position.

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  • Tyson Franklin

    Excellent article Amanda and I couldn’t agree more…We’re not banks. Why do people think Woolworths, Coles and others want payment upfront? It’s because they know some people won’t pay their bills. In my business (Podiatry) I’m often asked about accounts, and we tell them we have the same policy as Woolworths, and it works. Plus, we don’t spend time chasing people. Can’t wait to read more from you.

    • Amanda Fisher

      Love the idea of saying you have the same policy as Woolworths – that’s brilliant – and so true. Chasing money is the least liked activity in a business, eliminating the need to have to do it is liberating.

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