The Secret to Stop Chasing Money: Get Paid Before You Do Any Work
As an accounting professional, you enjoy working with money. However, chasing money owed to you is never fun. You’d be amazed at how many hours you devote each month to getting paid.
The hours add up. Preparing and sending out monthly bills take time; then you wait another 30 days to receive payment. Payment arrangements means you’re agreeing to finance your services. Plus, you write off a portion of your work when a client falls on hard times and stops paying.
Let’s fix those problems. More and more accounting firms are moving away from the traditional monthly billing cycle. Instead, with value based billing you get paid before any work is started.
As a result, your cash flow improves. Time originally spent collecting money is now freed up. And, no more write-offs.
Ideal clients who appreciate your expertise will eagerly want to get started. Outline your payment policy during your on-boarding process. Clearly explain what you expect from them and what they can expect from you. This removes any surprises, and you’re not chasing money at the end of each billing cycle.
Getting paid first may seem impossible. But many other industries already follow this model. If I need a taxi, I can either pre-pay a fixed amount or go by the meter. Paying a set fee eliminates any concern of the meter ticking during rush hour traffic jams. That’s why many firms have switched to value based pricing.
The Value of Getting Paid First
The accounting professionals that I work with like the idea but question the process.
- Will clients leave?
- I’ve always billed and don’t want to upset my clients.
- Will my clients really pay before I’ve done the work?
- No other firm does this.
- How do I figure out my fees ahead of time?
Your pricing policy doesn’t change overnight. Like any other new system, you map out the process beforehand. Plus, your system continues to improve over time.
Your Value Fluctuates
However, the best time to get paid for your work is when a potential client wants your service. There’s an urgency to get started now. Basically the sooner they pay, the sooner they benefit.
Think about the value of bottled water. That bottle has greater value when you’re thirsty than after you’ve quenched your thirst. Now, if you’ve been wandering in the hot desert for several days with no fresh water then its value is greater than when you’re leisurely strolling down Main Street in your hometown.
This same concept applies to your accounting services. Perceived value is fluid. It changes according to the circumstances. A client with an upcoming audit will experience greater urgency than a client who is tired of doing his or her own taxes.
Once the job is complete, you’ve quenched their thirst. So, the perceived value, and your client’s need, diminishes. That’s why my clients learn to get paid first.
Here are some advantages to value based pricing:
- Money for your business. Your cash flow improves. Time spent chasing clients for money is practically eliminated. As a result, you freed up precious hours in your schedule.
- You set the boundary. Work begins once you are paid. It’s that simple. Your mind is free to concentrate on your work. No more worrying if you will get paid, or how much.
- Experience counts. Your value increases as you gain expertise. They’re hiring your firm because of your knowledge, not because of the amount of time you spend doing the work.
- Better clients. Because you set up a win-win situation, the clients who do pay you up front appreciate your service. You eliminate the high maintenance clients who don’t value your expertise. My clients love this unexpected benefit.
- No more nagging. Clients who consider your service as an investment are more willing to follow through on your recommendations and respond to your questions in a timely manner.
- Problem resolution. Your clients view you as a resource. They’re more likely to contact you if they perceive a problem rather than hiding from you. Then, you can quickly resolve problems before they get out of hand.
Adjust Your Mindset
Your business mindset influences your decision to get paid before the work is done.
Clients expect you to ask for payment. However, discussing your fees may be uncomfortable. This is a clue that your mindset is getting in the way. It’s possible to change that.
- Awareness. Acknowledge to yourself that you want to get paid but don’t like discussing money. Several of your clients have already picked up on your discomfort.
- Create a policy. Create a payment policy that you’re willing to follow. Decide whether you require partial or full payment to begin work. Then, clearly let your clients know that work begins once they’ve paid you. Most regrets occur when you make an exception, especially when someone takes advantage of your generosity.
- Own your value. Make a list of all your skills and experiences that bring value to your work. Brainstorm everything. That special accounting course you took several years ago may be the exact thing that solves your client’s problem. Keep your list handy as a personal reminder during consultations with potential clients.
- Network with other entrepreneurs. Sharing information builds confidence. Join an organization like BNI (Business Networking International) to create a thriving business based on referrals. Attend meetings to practice talking about your business and the value you bring.
- Practice saying your terms. Use a phrase like, “Ready to get started? We need to take care of the payment first.”Practice saying it like it’s a part of your enrollment process rather than thinking of it as asking for money.
Practice, Practice, Practice
Your comfort level increases each time you ask for a payment. Remember, your new client wants your help. Eventually, getting paid first becomes a natural step in your enrollment process.
Talking with your clients about their finances is different than asking someone to invest in your services. Discussing your rates and then asking for payment brings up all kinds of money issues for accounting professionals. Some old beliefs get in the way.
On the other hand when you stop chasing money, your cash flow improves, you serve clients who value your expertise and you free up precious time to grow your business.