Erik has talked before about payment terms and the importance of getting the money your clients owe you as quickly as possible. Most companies ask for net 30 payments but that puts you into a cashflow bind. It would be ideal to have a net -30 but in reality, the best you can get is net 0 which means you get paid before starting the work. For us, we bill on the first of the month for that month’s work.
We want all of our clients to pay by ACH. Recently we did an experiment and offered a 1% discount to people who decided to pay by ACH instead of by check (which is just a pain). Two of our 20 clients who were paying by check converted to ACH which doesn’t sound like a lot but it’s 10%.
Would you prefer to keep that 1% or get your money upfront and sacrifice that 1%?
It’s not good enough that you’re making enough money because you’re always going to run into cash flow problems. If you’re not doing ACH and you’re not asking for payment upfront, well, you have some improvements that you can make.