When completing work for a client, do you run a credit check beforehand? Do you obtain a promissory note? Do you have anything besides their acknowledgment of a proposal or contract to ensure you get paid? In episode 218 of Journey to $100 Million, Erik explains how you are extending credit to a company or individual when completing work for them.
When you send a client the bill for your work, you are extending credit to that client. This is due to the fact that you are essentially giving them a loan for the funds needed in order to complete this work. Often times this can pose a huge risk as you may be unaware of the client’s credit situation.
Think of it like this: if you put in a week of work for a client and you have to wait a month for that payment, you just wasted a ton of time that you could’ve put into another client’s contract. Ultimately, you want to get paid for your services in a timely manner and make the most of your time, especially because companies have to pay their employees as well. It is very important to make sure you are maximizing and making the most efficient use of your time.
When doing work for a client, the finances that accompany this work could greatly affect your company. If you see these having a negative impact, think about ways you can mitigate this risk, or avoid it as a whole. Here at Array Digital, we are starting to move away from invoices and starting to request the payment upfront. Be on the lookout for future episodes on what tools we are using to do this and how we are planning to implement this process.