Thanks for your input. Excellent points. I think that many feel they must extend credit to any client that comes through their door, and that is simply not the case. Especially in this economy it makes total sense to “remind” everyone that is receiving services and paying later, it is a privilege and not a right. And as business owners, we need to use retainers as a ‘gentle’ way to send that message and protect ourselves.

The idea of giving pre-payment discounts is also a great idea, especially for those who sell services in time blocks.

Thanks!

With point #2 – requiring a deposit, I’d add not only request a deposit but don’t easily provide credit accounts. Credit for a product or service one has already received is a privilege in business, not a right. Why should you always be out of pocket when the client has received the product/service and its benefit to them.

Especially with new clients, either put a credit application process in place. Even having a minimum cash trade period prior to approving any credit accounts can help. Then also give a credit limit to the account, with purchases above this requiring cash payment. Not only will it help your cash flow, it will reduce your risk also.

Another point to add to these would be to offer a discount if paying early. Look at your cash costs – loans, overdraft charges and interest. These come at a cost to you which would cover, or at least reduce, any discounts you may give a client – even better if the client is always a late payer. Present it as the equivalent annual % rate the client would save and it’s even more appealing to them.