Last week we began to discuss how you must prepare your business to handle revenue before business starts rolling in. This week, we look at taking credit card payments, asking for deposits on job contracts and chasing payments.
If you can remove cash entirely from your system then your bookkeeping becomes even easier. In many cases, you’ll have to provide a card payment anyway as it’s really the only practical way of doing business via the internet.
The first step in setting yourself up to take credit card payments is to have a merchant account with your bank. This might seem like an additional hassle, but it’s worth noting that studies have shown sales increases of 50% with merchants that introduce credit-card payment options.
There are a lot of charges involved, even outside of transaction fees, but in today’s marketplace the ability to take payments in this manner is essential.
While you’re talking to your bank about a credit card merchant account, it’s worth also discussing extending this facility to also cover debit cards, such as laser.
Online payments can also be through services such as PayPal, used by 40 million people in 45 countries.
All too often we rush into work, so delighted with the fact that we’ve secured a contract, that we neglect to ask for a deposit.
Sometimes it’s not just neglect, it can be down to an unwillingness on our parts. In the real world, there’s nothing wrong with asking for a deposit in advance of work commencing. You’re going to do the job, the customer is going to pay – the only difference is the timing of the payments.
If a customer is reluctant to pay a deposit, then perhaps it’s not a job you’d be wise committing to anyway. For service work, you should be looking for 25%-50% of the overall job value, and in other areas you should at least be looking to cover your out-of-pocket costs, should the job be cancelled for any reason.
Similarly, you could work in a ‘progress payment’ system, whereby certain stages of the work being done trigger payment schedules.
When you’re working on jobs larger than you normally deal with, it’s essential that you have some form of system in place to reduce your financial exposure.
Credit where it’s due
Depending on whether your business is engaged in business-to-consumer, or business-to-business activity, you may find you have to extend a line of credit to your customers. Naturally, we all wish to be paid at the earliest opportunity, but sometimes you’ve got to agree to wait for 30, 60 days ....sometimes even longer. It will all come down to how strong the business is, and the circumstance of the relationship. It may help to incentivise early payments, such as offering a percentage discount.
Time to get tough
Regardless of how you structure your payment collections, there’s going to come a time when clients/customers just will not pay. This is especially true as the economic climate worsens. The most important thing here is to keep talking with those that owe you money.
Keep the pressure on, in a nice way, in the early stages. It may be that a customer has a genuine, but temporary, issue.
Keeping it civil will greatly help should the customer’s situation improve. The next step up is to either use a collection agency (who normally take a percentage of the money owed as their own payment), or call in the solicitors. In both cases, things will have turned sour meaning that it’s going to prove very difficult to find a successful resolution.
In association with Ulster Bank: If you are thinking about setting up your own business why not call into our Offaly Business Centre and speak with Laura Bourke, Regional / Commercial Manager, Ulster Bank or phone 087 9104545?