Asking for advance payments from clients is the most challenging task for a business. Some clients delay the payment, and it affects your business needs. This is because tapping opportunities in a timely manner is critical to growth. Not having sufficient cash to capitalise on one leads to a setback.
You must have gone through this situation at least once as a business owner. If it happened accidentally, it’s okay. However, if it becomes the rule, you must change the client payment terms. Yes, you can do this without straining the relationships. The blog lists the strategies that may help you get money by the deadline without losing clients.
What do you mean by upfront payment?
Upfront payment is the amount a customer agrees to pay before a company start working on a project. A business can either ask for a percentage of the total cost or the whole amount as an upfront payment.
For customers, it may mean the guarantee that the company agrees to provide the results within the agreed-upon time. Alternatively, an advance payment may prove as a reassurance for the business and help it serve the customer better.
Moreover, it reduces the risk of last-minute project cancellations or not getting paid after the delivery. What if the customer cancels the tie-up at the last moment? It may affect the deal you just signed and the payment liabilities. How would you get the money soon to fund the needs of the client steps back?
Such incidents are common in businesses. Therefore, you must have a backup plan. For example, here, you can proceed with the payment using an installment loan from an online marketplace. It helps you get the amount you need immediately. Use it to fund the payments in a timely manner if anything like that happens. It is the reason you need a strict advance payment policy for customers.
By asking for the upfront payment, you can reduce the chances of the customer walking away. It also helps you secure the wastage of resources and time to invest in the project’s completion.
5 steps to follow to get advance payments from clients
Customers prefer to deal with and stay with a company that takes care of their needs. Thus, if you provide customer-friendly services, they may agree to new payment policies. Asking for advance payments is challenging with the existing client base.
However, the years of dedication and basic understanding may help. You can launch discounts on the next purchase for new customers if they agree to pay in advance. It may help you achieve your goal of advance payments. Here are other ways that may help you:
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Step 1- Redefine the payment terms
Before dialing the client’s number to ask for the upfront cost, change the payment policy. Yes, every change you make to the official set-up must be in writing. It acts as solid proof of your company’s policies. It should include essential parameters like-
- Total costs
- The percentage of the upfront payment you need
- Payment methods are acceptable
- Cancellation policy
- Share basic instructions on “how to pay using a specific mode.”
Step 2- Provide the proposal and invoice in detail
Ensuring clarity on every aspect of the invoice and payment terms is important. When you get the project, list your payment expectations clearly with the rules. You should be strict about the payment timeline. It is when you commit and provide deliverables on time. Include the basic aspects in the proposal, like:
- The terms of the project
- Total cost of the project
- Upfront money requirements
- Due amount
You can even include incentives, discounts and other freebies to encourage upfront payments. It is because customers always search for “What is in it for me?”. You must hit the right nodes there.
Step 3- Draft an Upfront payment mail
It is something that you must master to convince your customer base. Your clients need a good reason to pay the advance on the project. Moreover, if you did not have the policy earlier, some may not feel comfortable with that. It is here that you need to be a bit strategic.
Split the customers into groups according to their frequent demands and payment patterns. It will help you create a personalised email to capture the person’s attention. You can even use the free templates that you may find online to draft a personalised email. A good email may help you get the desired result. Here is a basic template example that may help you understand how to create one.
Step 4- Highlight payment instructions in bold
Identify the issues a customer may face when paying the fee upfront. It could be serious financial troubles, saving issues or inability to pay a lump sum. Here, you can provide the option of paying the upfront cost in instalments. You should specify the dates by which the customers must pay the payment in instalments.
Moreover, you must start the project only after getting the complete payment. The amount one must pay in instalments could be according to the customer’s or business preference. Here, granting the upper hand to customers may help. They would like to pay as per their comfort if they want to do business with you.
Step 5- Communicate the final steps personally
Don’t leave your customers on seen after providing the payment guidelines. They might have queries that you must answer quickly. The best way would be to communicate the changes in person, apart from email. It lends a bit of a human factor to it. Your customers would like to know the reason for the sudden policy change. You must be transparent about it and inform them politely. You can even suggest to customers if they struggle to save the full amount.
Inform them about the financial options, like exploring direct lender loans for help. It provides a lump sum to meet the upfront payment costs. Later, the customers may repay the dues in easy instalments. They may also use the facility to cover one or two upfront payments if paying in instalments. It eases up the customer’s burden and relishes your services unstoppably.
Should I ask for an upfront payment from customers?
Whether or not you should ask for upfront payments from customers depends on your relationship. If you have been together for 5 years or more, he may understand your situation. However, you must have a valid reason to introduce upfront payments.
Tell him about the difficulties you face in managing operational costs like hiring, working capital, suppliers, and manufacturing expenses. He may understand your situation. Alternatively, you can implement this with the new customers without worries.
Bottom line
These are some ways that may help you get upfront payments from clients. It is important to be on top of the capital. It helps you meet any urgent and long-term business requirements without waiting for client payments. Introduce clear guidelines related to payment modes, timeline, upfront amount, completion date and the final amount. Ensuring clarity over payment may help you get it quickly.
Asking for advance payments from clients is the most challenging task for a business. Some clients delay the payment, and it affects your business needs. f you want to introduce advanced payment policies, read ahead. The blog lists the step-by-step strategies to ask for upfront payment from clients.
