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How to get paid on-time, every-time, from day one

One of the biggest problems I hear from agency owners is they have a subset of active clients that they hate working with.  When I ask why I hear answers like:
1. They don’t trust us
2. They don’t take my advice
3. They are super-picky
4. They are rude to my staff
5. They are a micromanager
6. They make stupid decision

But there is one problem that trumps them all.  As my list-member Kelsey described it, “It’s like pulling teeth to get paid!”

Six steps to getting paid on-time, every time

1. Never work without a contract.  (I’m looking at you, Trevor!)  Don’t do ANY work until there’s a signed contract in place.  By work, I mean planning, product research, strategy, estimation, sketches, spec work, etc. Zilch. Zero.  They want you to work; you gotta have a signed contract.

2. Your contract must have clear payment terms, and a clear response to late/non-payments.  Want to be paid on 7-day terms?  Put it in there.  Want to have your payment delivered by someone in a GoT outfit on a white horse at dawn?  Put it in there.  Make sure your contract specified how you get paid (check, credit-card, wire transfer, etc.), when the payment is due (immediately, 7-days after invoice, 30-days after, etc.) and what your response will be if you don’t get it.  You might charge a late fee, an interest penalty, or you might pause work until it arrives.  If you pause work, consider adding a “restart fee” along with a clause which says they will have to “wait their turn” before the project can resume so that you can serve other paying customers.

3. Adopt the attitude “late is late.”  A payment one day late should trigger the events you promised in your contract.  This is ESPECIALLY important the first time someone is late.  Remember, “People don’t remember what you preach, but what you tolerate.”  If you tolerate late payments once without penalty, you are telling them “disregard the contract and abuse me at will.”  I know that’s not how you feel.

4. Take the action your contract lays out.  If you claim a $50 late fee will be incurred, charge it and resend the invoice.  If you tell them work will stop if a payment becomes seven days late, stop work.  Send a note telling them “We have paused this project until the payment is received.  A restart fee of $500 has been assessed to your account and must be paid in full for work to begin.”

5. Show grace proactively.  If someone is six days late on an invoice, and you know on the 7th day you will stop work and assess a large penalty, call them and tell them, “Look, I don’t want this to happen to you.  How can you pay me now so we can continue?  I hate charging that big restart fee, but it’s my policy, so I have to honor it.”  Giving them a heads-up before something bad happens shows them you’re on their side and builds the relationship.

6. Don’t take on problems that aren’t yours.  Their budget isn’t your problem. Their finances aren’t your problem. Their cash-flow isn’t your problem.  It’s not selfish to say this; it’s just the truth.  If you decide to buy a car, but only have enough money for a bicycle, the salesman will tell you to come back with more money.  Sure, they have some wiggle room, but at the end of the day, you must respect them enough to allow them to make their own financial decisions.  Non-payment is a financial decision they can choose to make.

How have you tried to solve this problem?  How did that work?

About Marcus Blankenship

Where other technical coaches focus on process or tools, I focus on the human aspects of your Programmer to Manager transition. I help you hire the right people, create the right culture, and setup the right process which achieves your goals. Managing your team isn't something you learned in college. In fact, my clients often tell me "I never prepared for this role, I always focused on doing the work". If you're ready to improve your leadership, process and team, find out how I can help you.

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