Do work, get paid
If there’s one thing we can’t stand at team FD Works it’s late payers. (*Quickly checks own invoices have all been paid on time*.)
But seriously, there is simply no excuse for expecting another business to effectively bank -roll your own. Sadly, late payment or even worse, not getting paid at all, seems to still be one of the biggest headaches for our clients of all shapes and sizes.
And despite being at the coal face of this issue, I was still shocked to read in Campaign last month that some people in the creative industries are waiting up to 150 days after a project is completed to get paid.
150 days? That’s five whole months after the work has been done, not even from the start of a project, which would be bad enough.
What amazes me is that as well as the big boys not paying up to smaller suppliers, it’s often other SME’s stitching up their peers by not paying up. Not very entrepreneurially spirited and supportive of fellow start-ups is it? What’s happened to an ‘all in it together’ sense of camaraderie amongst those trying to make it?
Anyway, rant over. What can you actually do to get paid on time? This was a hot topic at a recent Bristol Media seminar I gave. Beyond the run-of-the-mill ‘invoice on time’ advice here are my ‘Five Golden Rules for getting paid’ which you might not have thought about already:
1. Start as you mean to go on. Agreeing payment terms at the start of a new project when contracts and budgets are the focus of discussions is completely acceptable. But for some reason many of us would rather spend a morning at the dentist than raise the subject of money and getting paid! Don’t sweat it. You are a professional with expertise, doing a job for which you should get paid. End of.
2. Credit where credit’s due. Get in to the habit of checking clients are financially sound before starting work. Or better still, pitching for work, better to find out now if a client actually has any money before spending hours of everyone’s time on winning it. You could pay out for a credit report or why not ask your new client for a couple of references from existing suppliers or download a copy of their latest accounts to see what shape they’re in?
Alternatively, if you use online accounting software check what resources you have access to via your provider. Xero for example has an add-on from ‘LedgerLive’ that offers its customers a free service where they can check out potential client’s payment history. Above all, if something smells fishy it probably is, trust your instinct.
3. Old habits die hard. Many businesses automatically invoice at the end of every month for work that’s been delivered during the previous four weeks giving 28 days for clients to pay. Don’t be afraid to break the mould, especially with much more project-type work about as client’s budgets keep getting squeezed. If you’ve won a three month project, why not ask for 25% or 50% of the payment upfront and invoice the rest half way through so it’s paid by completion? Many businesses work on this basis and if and when a client commits longer term, you can offer them an end of month/pay in 28 days facility. Don’t do it automatically. Also, think about invoicing for a lower amount but more frequently, invoice once a fortnight and get paid two weeks faster.
4. Friends in high places. If you want to get paid, make the person that processes invoices your best friend. It’s surprising how many people don’t know the finance team in their client’s business. You can invest all the time and effort in the client relationship you like, but the person who processes your invoices is the one who ultimately controls whether you get paid or not. Find out what your client’s payment cycles are. If they process invoices by the 25th of the month to pay at the end of the next month, get your invoices over a week in advance. Make it easy for the person paying you to pay you - simple. Vicky in accounts should be your new best friend!
5. May the force be with you. Think about how you can make chasing payment and invoicing on time and to the right person easy. Technology has moved on leaps and bounds since many people last entered the dreaded ‘agency database’ under the cosh from their own finance team to update the figures. Internet based software such as Xero can help hugely by automating the invoicing process. Add-ons such as Debtor Daddy are able to do lots of useful stuff like send out reminders (which gradually get a bit sterner) and keep track of debtors/payment history and key dates and agreements.
Hopefully these golden rules will help your business to get paid more quickly and you’ll be a bit better informed about the finances of the businesses you’re working for. At the end of the day, you can win the biggest, sexiest client but if they don’t have the money to pay you, they don’t have the money to pay you.
If you would like to talk to Jonathan about any financial aspect of your business, give him a call on 07929 306 034 or email email@example.com