A really hard part of being an entrepreneur is collecting money. Your billing strategies can make this job much easier for you and create better cash flow for your organization. Nobody likes to have to chase down clients for payment after the project is complete. If a client finds themselves unable to pay at the end of a contract, one option may be to sell the account to collections – for pennies on the dollar. The other option is to write it off to bad debts- also not a very attractive choice.
Asking for your money up front seems like a wise choice as far as billing strategies go, but new clients may be wary of advancing you any cash before establishing a trust relationship. (Stranger danger!)
The answer is staged billing. It works like this:
- Get a deposit for the work to be completed- set completion milestones
- Have the client sign off on those completion milestones
- As each milestone is reached, invoice the client for that percentage of the project
- If the client does not pay one of the invoices, work on the project will pause until the milestone invoice has been paid
In this way, neither you nor your client is put in the position of extending credit to the other party. You will have the money in hand to pay your payroll and other payables as the project goes along. Your client will have tangible results.
Nobody bears the brunt of the risk, and everybody is happier for it.
photo credit: http://www.flickr.com/photos/stevendepolo/5437288053/sizes/s/in/photostream/