The only thing worse than not having clients is…
Doing work for a client and then getting stiffed.
You know the saying, “Fool me once, shame on you; fool me twice, shame on me”? Well, there is definitely shame on me because it took me more than twice to learn never to start a project until I got paid. I may not have been stiffed outright more than a couple of times, but there were dozens of incidents where getting payment cost me too many emails, phone calls, and stressful nights.
It drove me batty. And now that I have eliminated this issue, I feel it’s my duty to pass the knowledge on to you, Dear Reader, so that you may avoid the soul-sucking world of non-payment and the more common “pulling teeth” payment.
By eliminating the threat of doing work that might go unpaid, I also eliminated the wasted time stressing about getting final payment, invoicing, and following up.
The answer was simple but not easy.
All my clients pay in full upfront. No exceptions.
If that sounds exciting to you, read on. If it sounds harsh, definitely read on.
Here are five reasons charging in full upfront isn’t just better for you – it’s also better for the client. And if charging in full upfront is impossible, you can still manage the maximum efficiency and minimum stress payment process.
1. Cash Flow Problems Solved
Let’s start with the obvious: When you are paid in full upfront, you eliminate all possible threats to your bank account, which means you will bank the most money possible given your sales.
2. No More Awkwardness
Every time you send an invoice, especially when you are in the middle of a project, you are charging in phases; if the client doesn’t pay, it gets awkward and annoying fast. Now you are stuck between a rock and a hard place, sending those annoying reminder emails where you are trying to sound upbeat (“friendly reminder!”) without letting your annoyance shine through (“we’re working our butts off for you; the least you can do is pay us as we agreed!”).
3. Save Your Most Valuable Nonrenewable Resource
All those follow-up emails take time, but what eats up even more time is the energy you expend thinking about getting paid. Perhaps you have a great system for following up, so you think about it only when you get dinged with a reminder, and then immediately forget about it once you’ve pressed Send.
Congratulations! For the rest of us, every time the unpaid invoice pops into our head, and we feel that twinge of annoyance because we still haven’t heard back is a moment of our life and a slice of our soul that is hard to get back.
In a recent episode of my podcast, Show Your Business Who’s Boss, I interviewed Susan Boles, owner of ScaleSpark, a Virtual CFO and Finance, and Operations Strategist. She’s a master at automation and systems that make your business run more smoothly, and yet in this episode, do you know what she says is the best way to make your payment systems efficient? Charge upfront!
Just because you can create automation to collect payments doesn’t mean you should.
It can be a huge time suck, don’t do it!
4. Clients Are Psychologically Bought In
This is the real reason upfront payment is best: It actually helps the client get the best result and most value out of you.
Why are they hiring you? So your expertise can help solve a problem.
What can get in the way? The client – second-guessing your expertise, micromanaging the process, or using their “phone-a-friend” to throw a wrench in the project.
There are tons of strategies to combat these issues, but the upfront payment in full is one of the easier ones—if you can get over the fear.
When clients pay upfront, they are also mentally buying into the process.
They made a big decision, and they want to have made the right decision. That means they are primed to love what you did! Because if they don’t, it means they made the wrong decision.
This is something I learned in the field, but there is actually science to prove it. Studies show that when we make a decision, we cannot reverse; our brains look for ways to validate the decision. In essence, we want to have been right. But when we can go back on our decision, the brain will constantly look for clues that we made the wrong choice. And if there is still an out available, the brain entertains the idea that maybe they should take it.
Imagine those two people getting into a project with you?
One paid in full and is ready to confirm that hiring you was the best decision of their lives. They’re excited about the work, and probably even a little more forgiving if there is a hiccup. (This is by no means a magic bullet or a reason to deliver subpar work. It’s merely adding to the value of the experience.)
The other client owes you money at the end for the final product. Even when it’s for something you want, there can be a certain amount of pain associated with parting with money. This person is subconsciously looking for reasons not to pay you. (This is not to suggest that any of this behavior is intentional or conscious. Most people will pay their clients because it’s the moral thing to do. We’re talking about the experience of working with the client.)
5. If You Are Ethical And Deliver At The Highest Value, There’s No Reason Not To Pay In Full.
If a client has every intention of paying you when a project is complete, what possible reason might they have for not paying you in full upfront?
Only one: They want an out.
They want to know that if they feel they didn’t get what they paid for, they have an escape plan. Otherwise, there would be no difference in paying upfront or in installments. And that means, on some level, they are okay with being dissatisfied to the point of not paying your final invoice.
We’re talking about the worst-case scenario, but I came across some slimy clients before I got my business act together. I chased a check for the second half of a $3,000 website we had designed, and they loved, from two lawyers who were in my weekly BNI networking group. Perfectly nice people, I thought, but apparently not so nice when it came to paying their tab. Call it a case of compartmentalized niceness, I guess.
The same thing happened with a mortgage broker in the same group. We worked our tails off for this client, and they were thrilled with the work, but they also thought it okay to ignore my final invoice for months.
They both paid, eventually, but the time and stress it caused me probably exceeded the actual work we were paid for. (I should have charged the lawyers more for “pain and suffering”!)
In contrast, these days, clients pay me $30,000 upfront before they see any creative work.
And in the six years we’ve been doing our intensive Brandup model (the $30,000 clients get their entire brand and website in two days, and the project is completed by 6 p.m.), I had only one client who wasn’t over-the-moon excited at the end of it. One! And, not coincidentally, that one client (it was really half a client; the other partner loved it, but he wasn’t the one with the credit card) didn’t pay in full upfront and lorded that second payment over us until we butchered his website—whoops, I mean, made the edits he wanted.
When You Absolutely Can’t Charge Upfront
Sometimes you just can’t charge in full. Maybe the project will take place over many months, or the bill is so big your client can’t manage a balloon payment without hurting cash flow.
If that’s the case, I recommend setting boundaries clearly, early, and often. Tell your client the project is on pause when you don’t receive payment within X days of the invoice. Heck, tell them there is an additional charge when you don’t receive payment in X days because of the extra manpower it takes to rearrange schedules.
Tell them whatever you need to make sure they are incentivized to pay you on time and to make sure you are confident in your decision to stop working until payment.
I know this might sound harsh. It might make you uncomfortable. You might be wondering, why is Pia so money-grubbing?
It’s not about greed; it’s about making sure you maintain your position as the expert consultant they are hiring, so they get the most value possible.
When a client’s bill is past due, even though you made the terms crystal clear from the beginning, your client has broken the contract. They have indicated that paying you is not a priority. And if making sure you are paid as agreed is not a priority, how do you think they are going to view your work? Equally unimportant.
On the other hand, if you are wishy-washy about payment terms and a client is late with a payment, that’s on you. When your client ghosts you and then reappears with an email about how they got sidetracked because they were so busy putting out fires all week at work and then, whoops, it was their daughter’s birthday party, and the clown backed out last minute, and well, you know how it is. All that tells me is everything that happened on that list was more important than making sure your project continued to go smoothly.
Sometimes stuff happens. I get it. But that’s why you have the simple and clear clause that states the consequence when stuff happens.
Believe me, if the world collapsed so much that they couldn’t take 30 seconds to pay your invoice in a five-day period, if they are a responsible adult, they will gladly take responsibility and pay the additional charge (or whatever you decide).
Having clear boundaries in your business, especially when it comes to payment, makes everything easier. Although holding your ground may be new and even uncomfortable at first, I promise you and your clients will all have a better experience if you commit to your boundaries policies.