Bank Balance

Why You Should Get Paid Up Front Before You Start Work

Saturday, November 24th, 2012

Cash is king, and without money coming in, your business won’t last long.

The saying goes that you should never discuss money in polite company, but as a business owner, there’s no room for reticence in discussing pricing and payment.

In many industries, it’s traditional to invoice after the delivery of work, but increasingly, freelancers and businesses are moving toward a different business model.

Whether you ask for a substantial deposit before you begin work with the remainder payable on delivery, or require payment in full, it pays to get paid up-front.

Contracts are only worth the paper they’re written on

Contracts are there to protect both parties, but whatever you may have in writing may not actually count for a lot.

As freelance designer Graham Smith has learned, contracts are only useful if you’re willing to take action to enforce them. No matter how watertight your agreement, if a client isn’t paying, you may need to get a lawyer involved. Whether that’s a step you’re willing to take will depend on the circumstances. In many cases, a freelancer or small business may decide it’s not worth the time or energy.

“A contract is like a low key anti theft lock for a car. It will deter the casual and opportunist, but unlikely to deter a hard nose, thick skinned manipulative individual,” he writes.

At Under30CEO, Danii Oliver voices a similar opinion.

“Breaking a contract is very easy for a client to do when the name of the game is who can out lawyer whom … Sometimes you might just have to walk away from a contract if it isn’t going to benefit your firm. Sometimes you might get bitten by both your lawyer and the client even after proper precautions have been taken.”

Getting paid up-front engenders goodwill

Up-front payment ensures the client is good for the money.

If you’ve opted to accept a deposit, clients willing to commit are less likely to require chasing for the remainder. Alternatively, by paying up-front, a customer is essentially placing a vote of faith in you. This also eliminates any potential time wasted hounding their accounts payable department further down the line. Nobody likes playing the role of bill collector, and nothing sours a working relationship faster.

According to consultant Maria Brophy:

“I’ve run into this many times: When I tell someone that they have to pay a deposit, and then they say “Oh, I don’t have the money right now.” This tells me that they may never have it. So I say “When you do, let me know. We are looking forward to working with you.”

“If a client won’t pay a deposit, they just aren’t ready to commit. If that’s the case, then you shouldn’t commit your time to their project.

“Don’t get mad. Just let them know that you are happy to start the work after they pay. Tell them to call you when they are ready. Be friendly and professional.”

In order to gain the trust of a client, do your best to ease their concerns by being transparent about your working processes and previous projects. A strong portfolio or client list and glowing testimonials will go a long way.

Getting paid up-front shows you place real value on your time

While some clients may balk at paying up-front, this does establish you in their mind as a high level professional and sets the tone for the rest of the transaction (or a continuing business relationship).

As Graham says, clients need to understand how much work you’ll be putting in and what kind of risk you are shouldering if you show your work prior to receiving payment. If you can successfully convey that, then asking for full payment will seem logical and downright reasonable.

“I cannot stress enough how much getting money up-front eases the financial burden and allows you to really focus on the work at hand. Everyone wins.”

As online marketer and coach Christian Russell puts it, asking for up-front payment;

“prevents clients who shouldn’t be clients from becoming clients”.

“When we sit down to go to work on your business, there isn’t any room for doubt or worry or you still trying to decide in the back of your mind whether I’m worth your time and money or not.”

Getting paid up-front protects you if the circumstances change

A business relationship can quickly fall apart when a client changes their mind and refuses to pay. Maybe they decide they don’t like your work. Or maybe the just decide to scrap the entire project and not use anything you’ve provided. It’s a huge waste of time on your part, and the comments thread on this post is full of similar horror stories. Up-front payment is the best way to hedge against getting ripped off. Otherwise, there may be very little you can realistically do about it.

In summary

Stick to your guns. As a professional, you deserve to be treated as such.

Don’t let clients muck you around, or you’ll give the impression (rightly or wrongly) that you’re a pushover. And nothing is easier to walk all over than a doormat.

In order to get paid, you have to be firm and clear about your terms of engagement – including payment. Some flexibility is fine, but it has its limits. Clients will see that you mean business and that they can’t mess you around. Remember: you need to value your time, and ultimately, seek out customers who do the same.