Getting your invoices paid by clients in a timely manner is absolutely vital to the future health and well-being of not just your agency, but also yourself as an ambitious entrepreneur. There’s nothing more stressful than waiting on money you are owed, especially when you have employees and the tax man waiting to be paid by you.
The Wow Company’s Benchmark Report last year showed that the average debtor days for a creative company is 41 days. The best was just two days, while the worst cases saw creative businesses having to wait more than 90 days before their clients paid them for the work they had done. This year's research launched recently and we're appealing for as many agencies as possible to take part.
Follow our tips below and we are confident that you can start to get clients paying up faster, allowing you more control over the finances of your business.
Ask clients for deposits
Do not start work on a client’s project until you have been paid a deposit for the work you are going to undertake. If the client is not willing to work in this way, then you should seriously consider walking away. If they are not prepared to do this then just imagine what a nightmare they could become for you and your business further down the line.
Stage the payments
Don’t leave a massive payment to be made at the end of the project, split the project up into its key milestones and look to invoice the client regularly throughout the delivery phase. Again, set this out upfront and be wary of any client who doesn’t want to meet you half way like this.
Reduce your payment terms to ‘by return’
If you give 30 days credit, you cannot start asking your client for the money they owe you for at least 30 days. This is crazy – it is the banks that should be lending to businesses right now, not you! And considering some of the invoice delinquency rates that occur even with some of the larger clients, leaving it late to ask for the money you are owed is asking for trouble down the line. Change your payment terms on invoices to ‘by return’ and you are then able to ask your client for the money sooner.
Be up front
State your payment terms up front in your pitch document. Such an approach won’t stop clients trying to negotiate with you on them, but at least you can start the discussion on your terms, not theirs, which will always put you at an advantage.
Don’t make the client’s shiny new website live or courier the new branding over to the client until they have paid you for it. Once the project is completed and delivered to them you have got no leverage to push through payment.
Have a system for getting cash in
Review your debtors at least once a week and allocate time to make phone calls to get the cash in. If you’re not comfortable doing it, then find someone that is. These can be tough conversations to have, particularly if you are the person responsible for managing the client relationships and driving more business out of it, so it is often easier to pass this over top an accounts based role.
Managing your cash flow is easier now than ever before, thanks to an array of cost-effective technology solutions. Here’s what the smart agencies are using in 2016 to help improve their cash flow.
Xero - 49 per cent of agencies are now using this accountancy solution, which means that the 51 per cent that are not are at a distinct disadvantage. Click the link to view a short video of how Xero will change your life forever!
Spotlight - A simple reporting & cash flow forecasting tool that will take the guesswork out of managing your cash.
Chaser - Set up personalised email chasers for clients that need a little extra nudge to get their cheque books out! Chaser automates what was once a manual task, which means that you can get paid while you sleep.
GoCardless - Direct Debits just got a lot simpler thanks to GoCardless. More and more agencies are realising that there is no better way of collecting cash from clients.
MarketInvoice - Allowing agencies to raise funds in 24 hours against unpaid invoices.
So, will this year’s Benchmarking Report research, which was launched last week and is now available online for you to take part in, show any improvement to how quickly agencies are getting their bills paid? To take part in this year’s research, which means you will be in line to receive advance notification of this year’s findings, simply click here.
Peter Czapp is co-founder and director of The Wow Company.