If you haven’t figured it out already, cash flow is the blood of your business. It circulates through your purchases and sales, pays your employees and puts money in your own wallet. But, there is always that one customer likes to put a hamper on your cash flow by no paying on time. So then, what do you do about the guy that always says, “The check is in the mail?”?
It is 2014 – Not 1960
While many businesses still take checks on a daily basis (lawn care services, landscaping) for work they have performed, a majority of businesses have adapted into a new thing known as credit cards. Just about everybody has them, and with the help of companies like Square and Paypal, anybody with a smart phone can accept them as payment.
By accepting credit cards you are able to collect payment directly after the service is done, and compared to receiving a check, you don’t necessarily have to wait for the credit card to clear; it will either come back denied or accepted almost instantaneously. Additionally, many people prefer to put large purchases on their cards these days as that can translate into tons of rewards points or cash back that their checks just can’t compete with.
Sure, you are going to get hit with a small fee for the card transaction. But, I would be happy to bet that you’d rather sacrifice a 2% charge per transaction and get paid your full amount then wait 3 months for a check to show up in the mail, or worse, never show up at all.
Set Payment Policies with Your Clients
Payment due up front. Sounds pretty scary, doesn’t it? By taking payments up front you do risk losing a few people that may feel like you are going to run with the money or not complete the work properly. However, you are also more likely to weed those out who aren’t going to pay anyways once you’re done. In my experience, most customers actually would prefer to pay up front, knowing that because they’ve already paid they have the upper hand and can critique you while the work is being completed – pick your poison.
An additional way to keep cash flowing would be to require some sort of deposit and a contract for the work to be completed. One way to do this would to be collected a 50% non-refundable deposit before any work begins, accompanied with a contract for the work to be completed. This way, you and your customer are both bound to the project at hand and are both protected. If you don’t complete the work, your client has the contract to show in court, and if they don’t pay, you have the contract as well and at least have enough to cover your costs (or should have, anyways.)