I was having a conversation with someone recently about starting up in business and as ever the usual reservations and fears came up - what if it doesn't work, what if we don't make enough money, where will we find customers etc, but there was one fear that was bigger than all of them - what if we don't get paid?
Now getting paid is important in business, but what you have to remember is even though you're relying on someone else in this situation, YOU are in charge.
Why the fear of not getting paid?
The particular conversation related to someone they knew who had set up in business and had done consultancy work for a big company that just wasn't paying them very quickly, in fact it was taking months to get paid. Now the situation resulted in the business owner almost losing everything they had (including their house) because they didn't get paid. Now I'm only speculating here, but I am guessing that the large company they had worked for was not going to miss the payment owed much, it probably being a tiny speck on their bottom line.
So what's the moral of this story? Well there are a few... but it all boils down to remembering that YOU are in charge of everything in your business, including who your customers are.
You can't always get it right, but there are things you can do...
Now don't think for a minute that you can always get this right as sometimes your customers face their own difficult circumstances from time to time, or perhaps just unpredictably turn out to not be so reliable in their payments as you were in getting their work done. But if you think not getting paid could happen, or if you just want to run your business on your terms, here's how you can do that:
- ask for payment in full up front before starting work (afterall you'd do this with a product so why not a service?)
- ask for a deposit before starting work (whatever you feel is enough to show commitment on both sides)
- explain your terms and conditions and make it clear that your final product or service will not be delivered if payment is not made, or that interest will be added after the set terms you state.
- Make it clear that YOU are setting the payment terms, not the organisation you are working with (you don't HAVE to accept the customers terms if you are not happy with them!)
- if the customer is a large corporate and it's too difficult to get them to budge on their terms, you have 2 choices if you are not happy with their payment terms... you can choose to accept them and ensure you budget your cash flow accordingly, or you don't work with them.
And yes this might all sound like stating the obvious but you need to understand it and work to it. If you work with larger companies understand that they may have many hoops and stages to go through for payments to get processed. You may have to agree to 90 day terms, or 120 day terms, or more, but that is YOUR choice. If you like to get paid quicker then state your terms as payment in advance, or 50% in advance. If you are good at what you do, and the customer wants to work with you they will pay.
Can you really set your own terms in business?
Well, yes you can. It doesn't mean every customer will agree to them though, but I see that as a good thing.
We ask all our website customers for a 50% deposit before we even schedule in a project. To get on our schedule you have to show your commitment. Payment is not just 'money' its your commitment and appreciation for what is on offer. Money is a way of 'expressing appreciation' for what you are receiving - a good, a product or a service. And yes there are some prospects we talk to who do not want to make a payment in advance, and that is fine, as it means right away that they are not committed to the project and are not going to work in partnership with us. For the customers we do work with who are keen to work with us, they are committed to partnership in the project, and appreciate us, so payment in advance is never a problem.
It's all about commitment, partnership and energy...
For events, products, and programs that I offer for Being a Business Celebrity there is always an expression of appreciation in advance. This is actually very important for the client more than it is for me. Once you are committed to an action, you need to demonstrate this, and payment is one way to do that. Once you are committed financially this is a statement to the Universe that you're ready to go, you're committed to the outcome, and you want to get started. Payment afterwards is like saying, well... I'll give it a go... I'll see what happens...but I'm not convinced...
So back to the point of my post - YOU choose your customers. Next time you are worried about cash flow, or complaining about how your customers aren't paying you, then remember who said yes to working with them... uh huh that's right - it was you! You have to take responsibility :)
What you can do now!
And if you don't like how your customers work, then renegotiate your terms, or look for some new customers who do appreciate you (and appreciate you up front!).
Of course this isn't just about money either... it's about attracting the clients you want to work with and who want to work with you, it's just that getting paid is often the biggest fear, and the biggest test. Make sure you only work with customers who pass your test!
Just a small print post script: I am not a financial adviser, or accountant or anyone qualified to advise you about money matters, but I am able to share my experience about business, and how you can make it fun and work for you, to not have you stressed out and not getting paid :)
Want to talk more about this?