Being successful in a small business is not just reliant on making a profit on whatever you sell, whether it is goods or services. It relies also, and perhaps more importantly on getting paid for those goods or services.
I was surprised yet again this month to come across a small business owner, in this case a freelance designer, who had not thought to set out clearly just when he expected to get paid and ensuring that was understood by his clients.
He wondered whether he should offer a discount for payment at 10 days or 30 days. That, I suggested, would just mean he would be giving a discount to his current prompt payers and encouraging others by suggesting he was prepared to finance their debts to the extent of 30 days which could be attractive compared to bank overdraft costs. He also needed to make sure that he got invoices out immediately a job was done, and certainly not wait until the end of the month (and sometimes into the next month) as he had been doing.
Long ago I established a simple system with my clients: no job would be started until the previous one had been paid for. I did have a couple of exceptions for weekly jobs but on those there was a date for payment each month which I had got from the client and no future job would be started if that date went past without payment.
When you have your own debts it may seem hard to seemingly pass up the chance of more work, but if you are offering fair value in what you do you will find that clients will keep to agreed terms when it is in their interest. Those who do not may not be worth working for; it is no good doing work for which you will never be paid, or paid so slowly that extra costs in chasing payment eat away at all the profit and do not return your own expenses in doing the job.
Part payment should be normal in advance on first orders. In my experience as a publisher, most book printers now work on half payment in advance and the rest before the finished job is despatched. One large printer told me recently that is what saved them in the recent global difficulties.
Faced with such payment terms from printers I can understand that some publishers will be trying to delay payments to other suppliers ... will you be one of those?
I was surprised yet again this month to come across a small business owner, in this case a freelance designer, who had not thought to set out clearly just when he expected to get paid and ensuring that was understood by his clients.
He wondered whether he should offer a discount for payment at 10 days or 30 days. That, I suggested, would just mean he would be giving a discount to his current prompt payers and encouraging others by suggesting he was prepared to finance their debts to the extent of 30 days which could be attractive compared to bank overdraft costs. He also needed to make sure that he got invoices out immediately a job was done, and certainly not wait until the end of the month (and sometimes into the next month) as he had been doing.
Long ago I established a simple system with my clients: no job would be started until the previous one had been paid for. I did have a couple of exceptions for weekly jobs but on those there was a date for payment each month which I had got from the client and no future job would be started if that date went past without payment.
When you have your own debts it may seem hard to seemingly pass up the chance of more work, but if you are offering fair value in what you do you will find that clients will keep to agreed terms when it is in their interest. Those who do not may not be worth working for; it is no good doing work for which you will never be paid, or paid so slowly that extra costs in chasing payment eat away at all the profit and do not return your own expenses in doing the job.
Part payment should be normal in advance on first orders. In my experience as a publisher, most book printers now work on half payment in advance and the rest before the finished job is despatched. One large printer told me recently that is what saved them in the recent global difficulties.
Faced with such payment terms from printers I can understand that some publishers will be trying to delay payments to other suppliers ... will you be one of those?
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