Beating Cashflow Crises – Payments in Lip Service & Overdue Invoices

It has been over three years now since I started my journey of self-employment. From working full-time and receiving my monthly pay packet – on time, every month – I moved into a world of uncertainty but excitement, with no guarantees of success. Fortunately, I have managed to make my business work, and whilst it is in a relatively healthy position at this point in time, I can’t say it has been without it’s difficulties.

Along the way, I have encountered a number of hurdles, gained invaluable experience, and have learned some incredible life lessons. In this series of articles, I continue to share some tips and general nuggets that I have picked up from this adventure – many of which a budding web developer or sole trader might find handy ahead of taking the leap!

« Points 3 & 4: Mortgages, Money & Margins

5. Plan out your Payment Terms

When it comes to putting payment procedures for your clients in place, do this early, and try to create a one size fits all policy. You don’t want to be seen to be making up your rules on the spot! Therefore, if you’re a web designer, why not have a 50% split in terms of taking a deposit and getting the final payment.

It sends a signal that you’re not able to start a job until your client has committed.

This will help with your cash flow, and certainly sends a signal that you’re not able to start a job until your client has committed to putting cash on the table. I’ve even written a dedicated article about why taking a deposit is a MUST for a web developer.  Certainly, do not start any job without getting payment if you are not hosting it yourself – you need to be in complete control. 

There has been one occasion in the past that I have learned the hard way in terms of creating a website and giving the client access before they have paid anything for it. This, of course, is not to assume that each and every client is a deviant that is waiting to steal your services – however, a 50/50 split simply makes sense, and here’s why you should never been afraid to ask for money up front.

6. Plan for your own personal future

You will quickly learn that many people say they will pay, but they will not. Therefore, when budgeting for your month, you need to be led by what’s in your bank account rather than anything that you’re “expecting” to come in.

You have regular hosting fees to pay out, therefore why would you prioritise a job whereby you don’t know when you’ll get paid?

It is absolutely vital that you support your existing clients who have already put cash in your bank, therefore don’t be afraid to prioritise quick payers – because by doing so, you can maintain cash flow and keep the business running smoothly. You have regular hosting fees to pay out, therefore why would you prioritise a job whereby you don’t know when you’ll get paid? All of your faithful paying clients should be getting a first rate hosting service, so why would you risk affecting them by giving yourself cashflow issues?

Despite this, it is worth keeping in mind that many companies tend to have end of month banking runs and it is very difficult for them to make payment outside of these systems, therefore you do need to have *some* flexibility here. For example, if you invoice someone on the 2nd of the month, it may simply be the case that you won’t be able to receive payment until the 31st!

Points 7 & 8 Maintain Policy & Utilise SMS (Coming Soon) »