Remember, above all else: you aren’t a bank handing out loans to clients at no interest. If a client is holding money they owe you, then they are making money off your money while slowing your growth. It is simple as that. Does that sound wrong and maybe a bit insulting? Well, both are true. And while the client is collecting interest on your money, you are forced to use your own money to pay your overhead, further devaluing your ability to earn interest on your coffers, reinvest in the company, or offer employees additional benefits. Businesses fail largely because they have the wrong clients, not the wrong services. Make it a priority to find clients that pay, and those that pay quickly, make them a priority.
So if you are stuck with long term clients that pay you when they feel like it, you might be in a tough spot. You have two choices: 1.) Suck it up and deal with it 2.) Don’t continue to work with that client or 3.) Move to a retainer relationship. Established clients typically will want to continue business as usual, so what’s the hedge? Scale back the number of hours you are willing to work without payment. You must reduce leveraging your company for the benefit of a client that doesn’t pay in a predictable manner. This is a more of a comfort level kind of thing. If payments resume in a predictable manner inside of 30 days, you can return to business as usual.
For new clients, 100% go with a retainer relationship. All new business at EA is retainer based. This allows us to always be current with payments. This has been a watershed moment for us, and has given us the ability to grow predictably, independent of the economic hardships the Client might be experiencing at any given moment.
This is part of our Stewardship Series where we give insight into our industry for aspiring professionals and business owners alike.
