Archive for August 29th, 2007

Dear Danielle: Should I Get Upfront Payment?

Dear Danielle:

Do you suggest requiring an up-front payment of any kind from clients? –CM


Does your supermarket let you take your groceries home and eat them before deciding whether or not to pay for them?

Okay, I’m being a little flippant, but, seriously, this is business, not charity. Allowing folks to pay after the fact not only leaves your business unnecessarily vulnerable, but it amounts to extending credit, and credit is something that must be earned, not expected. I don’t know about you, but I’m not in business to subsidize or finance someone else’s business.

I’m not sure why the Virtual Assistant world continues to have a problem understanding this, but it’s actually very common for businesses to expect 100% payment upfront.

If you are doing project work, I really recommend you require 50% payment upfront or the per-hour minimum you have established in your practice (whichever is greater), with the full balance due in full upon completion and prior to delivery. You could even bill in other percentage increments throughout the project to correspond with completion of certain phases.

Requiring deposits and upfront payments (such as retainers) helps your business in a few ways. First, it weeds out anyone who isn’t serious about having the work done and might end up stiffing you (with a deposit, at least part of your business interests are covered). Your business cash-flow is improved, and administrative time reduced. And you end up getting a whole other (better) kind of clientele.

With new clients on Pay-As-You-Go (PAYG) plans, who pay by the hour rather than on retainer, I would require a first-time deposit in the order of something equal 3-5 hours work or your smallest retainer fee. It’s sort of like earnest money, and helps weed out those who aren’t going to be committed to working together.