How to Successfully Collect Upfront Payments

Author: Prosperity Bookkeeping LLC |

Blog by Prosperity Bookkeeping LLC

Managing the ebb and flow of cash in a business requires a mix of art and science. Juggling bills while waiting for customers to pay you can be a difficult balancing act.

Read more at “Why is Cash Flow Important?”

To improve cash flow overall, businesses can ask clients to pay them upfront, before any work begins or services are provided. This business technique comes with several advantages.

Manage Cash Flow

By accepting upfront payments, business owners have the extra cash on hand to cover out-of-pocket expenses associated with a project. Consequently, the business owner isn’t digging into cash reserves to fund labor, supplies, software, etc. An upfront payment provides working capital so there’s cash on hand to make important and timely purchases. This is especially important for long-term projects that take months to complete. Service providers experience undo strain by financing a long-term project before receiving any compensation from a client. Upfront payments ease that strain.

Read more at “How Can a Business Manage Cash Flow?”

Avoid Late Payments or Nonpayment

How to Successfully Collect Upfront Payments

A second advantage to upfront payments is peace of mind. Because invoices are paid at the start of the job, business owners don’t need to worry about the possibility of late payments or not getting paid at all. Business owners can more easily manage cash flow when they are assured of client payment.

Develop Customer Relations

Thankfully, most clients readily agree to pay upfront for products and services. They realize that paying upfront is an acceptable and common business practice. Likewise, they appreciate knowing the cost of a project at its outset rather than being surprised by higher-than-expected invoices once the project is completed.

Accept Partial Upfront Payments

To make upfront payments more manageable for clients, business owners often charge for only part of the project. Instead of full payments, clients pay partial amounts. Once the job is completed, the client pays the balance.

View this short tutorial on how to accept customer down payments in QuickBooks Online

Compile Financial Terms into a Proposal

For ideal customer relations, all payment information should be compiled into an easy-to-comprehend written proposal. The proposal includes payment terms, so clients know when their payment is due. Sometimes, clients will need a few weeks to arrange payment. So, be willing to adapt the payment terms to the client’s financial circumstances. Don’t expect payment on the day they sign the proposal.

Give Clients Several Payment Options

Lastly, be flexible by accepting a variety of payment options. Many clients find it easier to make payments online. Others, however, don’t feel comfortable entering their financial information on the internet. Therefore, give clients the option to pay with a check or credit card, also.

Manage Cash Flow for Business Operations

Accepting upfront payments gives business owners an advantage when managing cash flow. They keep tabs on their accounts, so they have enough cash on hand for day-to-day business operations.

Contact Prosperity Bookkeeping

Here are four ways to learn more about managing cash flow:

How to Successfully Collect Upfront Payments

  1. Read “5 Benefits to You and Clients When You Charge In Full, Upfront.”
  2. Download our free report, “105 Ways to Increase Cash Flow In Your Small Business.”
  3. Learn about our Cash Flow Advisory Services
  4. Contact us for professional bookkeeping services and consultations.