Some Clients Always Seek a Discount
Anne already worked too many hours each week. She didn’t want to add anything else to her already full plate. So, she postponed the tedious process of sending out monthly invoices. Of course, her cash flow suffered. When she couldn’t ignore it any longer, she would finally work a couple weekends to calculate hours and recall what she did for each client.
Here’s how this eventually backfired. Instead of routinely sending her client a monthly $800 invoice, this client received a $10,000 invoice for a full year of accounting services. The client called wanting to negotiate the total amount.
Reducing the total invoice meant doing work without getting paid. That was something she didn’t want to do. Anne; however, was unsure how to resolve this.
Procrastination creates cash flow challenges.
- Her cash flow now has ebbs and flows rather than steady, predictable income.
- Her payroll expenses continue-no matter what.
- Reduced monthly revenues prevent her from adding to her team.
- She unknowingly ends up financing her clients’ work with her.
- Some clients are chronic late payers.
- Invoicing opens the door to fee negotiation.
Continuing to manually invoice clients is inefficient and ineffective. Billing for services already performed consumes time, runs the risk of reduced revenue and adds financial stress.Billing for services already performed consumes time, runs the risk of reduced revenue and adds financial stress. Read full post. #getpaidwhatyoureworth Click To Tweet
Do You Enjoy Playing Poker?
Anne and I discussed how value is subjective. The value of her services is greater before it’s done than after it’s complete. It’s similar to buying a new vehicle. A shiny, new car depreciates by as much as 30% once you take ownership and drive it off the car lot.
Fortunately, most clients will not ask to negotiate fees. They’ll simply pay the invoice. But according to Salesforce about 91% of unhappy clients simply leave without sharing their concerns with you.
Who are your negotiators?
- Bargain hunters. Price-sensitive clients are always on the lookout for a deal.
- Natural traders. It’s the norm for some cultures to negotiate on everything.
- Poker players. These clients routinely ask for a reduction. It’s a game of bluff. If you stand by your rates, they will pay your full fee.
Be wary about lowering your rates. It signals that your rates are suggestions and negotiable. Even if you tell a client only this once, you open the door to future negotiation. Here’s where you want to stand firm and say no.
Simply lowering your rates is not negotiation. It’s a reaction to avoid an uncomfortable conversation.
True negotiation is a give and take to reach a mutually satisfying agreement. You want to ask for something in return for adjusting your rates.
The Long Term Impact
Consider the long-term impact of client’s who negotiate lower fees.
- These are price-sensitive clients.
- These clients lower your profits.
- Some may be highly demanding and lack respect.
- These clients have greater loyalty to low prices than your accounting services.
- You tolerate them for too long.
- Low profit clients increase your workload. It prioritizes quantity, rather than quality.
- Since you’re a hard worker, your work cuts into your personal time.
Because you get paid after the fact, your value lowers once the work is complete.Be wary about lowering your rates. It signals that your rates are suggestions and negotiable. Read full post. #getpaidwhatyoureworth Click To Tweet
Anne always invoiced her clients. Although she had tracking software, she didn’t consistently track her time. So, she changed to a fixed monthly rate to simplify things.
She fell into a pattern of postponing invoicing until she needed the cash flow. Recreating several months, or even a full year’s worth of services, took many more hours than necessary. It was a frustrating, time consuming process.
Receiving payment was equally inefficient.
- Some clients paid late.
- The majority of her clients continued to write paper checks.
- Clients with cash flow issues asked for exceptions.
This old school billing practice had stopped working a long time ago. It was a dinosaur that needed an upgrade.
Goodbye Invoicing. Hello Pricing.
The conversation with her client about his $10k invoice was an eye-opener. Chasing money exhausted her. Tolerating the status quo was no longer acceptable. She savored the idea of receiving payment before she did any work.
Anne followed these steps as she transitioned from manual invoicing to automated pricing.
- Chose a payment platform which automated invoicing and ACH payments.
- Setup the new account.
- Sent a letter to her clients about her new payment policy. The letter highlighted:
- Client benefits.
- Outlined the transition from billing to pre-payment for services.
- Clients received 30 days’ notice about the change.
- Pointed out that next month includes two payments. One from the previous billing cycle and one for the new month.
- Backup plan for clients who contact her about cash flow concerns.
- Clients’ monthly services will not be performed until she receives pre-payment.
Cash flow wasn’t a concern for most of her clients. The majority made the double payment and transitioned without a glitch. For the first time, all her clients were up to date with their fees.
Three clients called about the transition to the new pricing model, which was less than Anne expected. Two of these clients had questions. One client didn’t have enough cash flow for a double payment.
Anne followed my guidance with this client. We wanted all clients transitioned to the new pricing model at the same time. The client with the cash flow issues would pay the new fees, like everyone else. The balance due for the past month’s services were spread out over 3 months.If you're ready to improve cash flow, then discover the exact steps to successfully transition from invoicing to pricing. Read full post. #getpaidwhatyoureworth Click To Tweet
No More Chasing Money
Anne and I outlined a solid plan before setting up a conversation with the client who wanted to negotiate her $10k invoice.
She realized this client was a poker player.
Instead of caving into his request she offered him two options.
- Pay the $10k invoice in full.
- Offer a 3-pay option that was 20% higher than the pay in full amount. Each payment would be $4000, for a total of $12k.
As expected, this client chose to pay in full.
Yes, the shift from invoicing to pricing required additional time and effort to get started. Fortunately, the benefits were immediate.
Now that she had steady, reliable cash flow she could afford to expand her team. No more guilt about high invoices for several months of services.
Automating her invoice and payment process freed up precious hours. And, her stress levels lowered because she no longer tolerated an outdated, clunky payment process.
Since Anne planned out the transition and clearly communicated this change to her clients, she didn’t lose any clients. In hindsight, she wondered why she waited so long.
What about you? If you’re tired of chasing money, negotiating fees and getting paid after the work’s completed, then make the switch. Follow these steps to improve cash flow and successfully transition from invoicing to pricing. Right NOW claim your FREE RESOURCE to double your income working half the time.