Get the Money Out of the Way
There are handshake deals and then there are contracts. How do you operate? Do you put everything in writing before you start working on a client project? Do you ask for a deposit up-front?
In the past eight years I have been running my business, I have always received payment from my clients. Of course, there have been a few bounced cheques along the way, but no financial losses. One of the most valuable lessons I learned while training for my business was to get every client to sign a contract before working with them. My classmates and I were given a sample contract to review. This particular contract was specific for consulting services – perfect for my business.
From that day onward I used that contract as a template after customizing it slightly for my own purposes. The contract was general enough that I could use most of its content. When a client signs a contract, the project then becomes official. Without a contract or a deposit up-front, you put yourself in a vulnerable position. And yet, when I first work with a client, I don’t always get a contract, especially if I am conducting a marketing assessment. Why? Because this project starts as an initial meeting, which is as far as the relationship might go. Under these circumstances, the client pays the entire cost of the assessment on that day. If there is no cheque cut, then I do not write the marketing assessment report.
It is after this assessment that I have a clear idea of what the client needs. Then it is easy to draft both the proposal and a contract. Although I would like to paint a perfect picture of myself for you, I have to admit that there are times when I don’t take the contract route. This is merely a personal decision in the moment, and I would not recommend it. Most of my clients get billed up-front every month in the form of a retainer payment. I then proceed to work with them by creating, implementing and testing marketing initiatives. Conversely, I have other clients who use my services on an as-needed basis. These are often clients who received a marketing assessment, and now want to hire me to work on a small project.
An example of this would be project-managing a new website for a client. Under these circumstances, the client does not sign a contract; we have a verbal agreement that each month they pay me upon invoicing. I work a specific amount of hours and then bill accordingly. These clients are usually micro businesses (less than four employees) as opposed to small businesses, so I am more flexible with them. Am I taking a risk? Most of the time I don’t feel that I am, because they have a good track record of paying me within a reasonable time frame. I minimize my risk by working with only one or two micro businesses under this payment structure at any given time.
The other exception to signed contracts is for my long-term clients. Once they have signed a contract for twelve months, I may work on a verbal arrangement after the first year. I call it trust; some might call it lazy. If I have a good long-term relationship with a client and they are paying their monthly retainer consistently, then for me, a written contract becomes less necessary.
What I suggest for those of you just starting up your business, is put systems in place from day one, so you can be really clear with your clients how you would like to get paid and what terms apply. The clearer you are with your clients from the beginning, the less likely you will run into difficulties with getting paid. Getting paid is one thing, and getting paid on time is another. The last thing you want to do is spend your valuable time chasing down money owed to you. It is emotional and exhausting. I would rather let go of a client that does not respect my payment schedule than sit around praying for the money to show up.
When it comes to money, eliminate as much stress around getting paid as possible. I find that in order to give my clients 100 percent, I can’t be worrying about when they are going to pay me next. I get money issues out of the way first, and then I can put my focus into providing clients with the best service possible.
Find out what billing and payment standards are common in your industry. Either go with that or create a new system that works for you. The less time you spend thinking about getting paid, the more energy you have to invest in a great relationship with your clients.
Jen DeTracey, founder of Lift Strategies Inc., helps organizations accelerate their growth and manage that growth without overextending their resources or their people. To find more articles, tips and information about Jen DeTracey, visit www.liftstrategies.com.