Payment compilation is one of the most common problems of the freelancer community. As per research, 29% of freelancers get paid late. So freelancers must have strong upfront payment strategies to avoid getting bogged down by the financial insecurity that most of the clients lead them to.
Do you often hesitate to ask your clients for upfront payment? Well, your fear can ruin your entrepreneur career. To help you combat such a situation, we have come with some simple tips. Check out this article to rule out the chances of payment delays!
So, first, let’s begin with the basics!
What is an upfront payment?
It’s pretty understanding from the term that it simply means asking for payment upfront. But when? In this method of transaction clients either pay a partial amount or the entire amount before completion of the project. It’s a kind of ‘deposit’. Upfront payment is not always required in full for the freelancers, as that could cause trust issues. But a partial upfront payment is definitely beneficial for both clients and vendors/freelancers.
But why, what and how would surely remain if you don’t have a clear idea. Let’s discuss that in the following sections.
Why charge an upfront payment?
Ensuring a steady flow of cash is the prime reason behind asking for upfront payment. Sending an invoice and waiting to be paid does not always work out properly. Hence, most B2C companies charge upfront payment. The case is the same with small businesses and freelancers as well. Delayed payment hence stunts financial growth and causes business to suffer.
What benefits does it have?
Implying upfront payment is advantageous. Let’s discuss more on its benefits:
- First and foremost, it keeps a steady cash flow, especially for longer projects.
- It instills a trustworthy relationship between the client and the vendor.
- It provides financial security that helps you to focus better on your project for the best output.
- It funds you with ample resources for completing the project and dealing with its related expenses.
Finally, how to get paid upfront. Here it is!
Tips to get paid upfront
Ask your clients for partial upfront payment:
Hearing about upfront payment may turn away a few clients as they may not rely on you. Asking them to pay 50% or 10% will ensure them that they can trust you and on the other hand you can secure your finances.
Understand their common hesitation and take necessary steps:
Uncertainty is the prime factor that holds your client back from trusting you with upfront payment. Figure out what they are worried about:
- Are you going to deliver quality work after receiving the payment?
- What if the project does not work out as it should be, and will you refund the money in that case?
Guarantee them to ease up their worries by the following methods:
Break down the project into milestones:
If you are working on a large project, then break it up into smaller milestones. Complete each part and ask for upfront payment for each milestone. This would give them peace of mind and as the work progress is visible before they pay.
To prove your authenticity towards your client, use an escrow account. This is a type of account where the client will send the money but you cannot touch them until the transaction is complete. These would offer security to both sides and would ensure that the client would pay once the project is completed.
Social proof helps a great deal to ensure your reputability and authenticity. Mention the name and business logo of your previous customers to ensure that their dollars are in safe hands.
Offer early payment incentives:
Well, in case the upfront payment does not work out, offer them early payment discounts like 2/10 Net 30. This is a 2% discount on the total due amount if paid within 10 days. This would help you speed up the process and will ensure security for the clients.
Offer set fee per project:
Typically charging set fees makes the entire transaction way more comfortable for both the freelancer and the client. The clients get to know beforehand what they have to pay for the project and being a freelancer or a business owner you can decide what you will be compensated with. Hence, this eases up asking for upfront payment as both sides are aware of the cost.
Offer them attractive discounts:
Offer them discounts that they can’t refuse your proposal. Firstly, decide the price of the project and then inflate the price up to 10-20%. Pitch your clients with the inflated rate and offer a discount of the same rate so that it convinces your client to choose you over others. This will ease up your way of asking for upfront payment.
Do not deliver the project until you receive payment:
Request your client to pay before receiving the full project. Provide them visuals of the project or send half of the project to ensure that the task has been completed. This would ensure the client that requests have been met and would guarantee you that there is no risk of late payment.
Take help of electronic invoicing mechanism:
Implementing electronic invoices eases up your invoicing procedures and offers hassle-free payment. The invoices are mailed immediately to the clients and they pay online which takes much less time than any other process. Moreover, with Billbooks you get invoice templates and auto-filled fields to reduce your task. Fill in a few vital details and get it done within a few minutes.
Improve your business finances by asking for upfront payment. It helps a great deal to secure your business wealth while you take up any project. Frame your agreement or contract in an organized way in case you ask for such a payment system as clients would be much inclined to know more about your business and other details. With the above guide, you can weed out the risk of late payments and build a strong business relationship with your clients.