I am fairly new to the business and have a few clients I know and trust, but am branching out and will be acquiring clients I have no prior experience with. Do you have any recommendations or suggestions on how to deal with billing new clients who you have no prior working relationship with? When billing a monthly retainer package of $1,000, for example, if you do a month’s worth of work, then send them the bill, and wait another 30 days to get paid, you could potentially be working for 60 days before you get paid. Do you recommend asking for part or all of your monthly fee up front or would you bill at the end of the month? —LB
This is a great question because it’s another reminder for us veterans that we can never take for granted that everyone knows what we think are commonly understood principles or details in business.
So, the first thing I would explain is that a retainer is a monthly upfront fee paid in full and in advance of service. And the service for which retainers are charged in our business is a month of ongoing administrative support.
The idea is that you and the client are entering into a relationship. With the retainer, they are securing a spot on your roster, reserving your time and preserving their priority over any other side (non retainer) clients or project work you do in your business.
With retainers, they are generally billed with due dates of “on or before the 1st.” There are no “deposits” toward a retainer because it’s not a layaway plan. They either pay beforehand or they don’t receive services.
In my practice, I have clients sign a credit card authorization form (AGR-30 in the Success Store) so that I can automatically run their credit card when it’s time for them to pay their retainer each month. So essentially, I pay myself, and my due date is the 25th of each month (and I never pay myself late, lol).
I do this because:
- the 1st is one of the busiest days of the month for me and for my clients (and most people running businesses, I think). I don’t want my money and being paid held up in any way; and
- if I happen to do billing for any clients (i.e., invoicing their clients on their behalf), I don’t have my business’s billing and theirs all trying to compete for my attention on the same day.
If you are billing after the fact, that is not a retainer. For the reasons you recognize (and that fact that you’ll run into far more nonpayment issues with nothing to mitigate your losses), you will have all kinds of financial problems if you bill at the end of the month for services already rendered. The last thing you need to be in is the credit lending business (which is basically what you’d be creating by billing after the fact and waiting to be paid).
How you bill in your business becomes part of your business management and systems for success. It should be given as much careful thought and consideration as every other planning and operational aspect of your business.
This is also an example of the kind of things I will be sharing with attendees at my business management systems class this coming August 22. Check it out!