The Sixth Sin of Agency Owners – Not Getting Paid on Time
Why are you letting clients get away with not paying you on time? That’s a major sin that’s going to have huge effects on your cash flow.
Everyone who’s ever worked in invoicing has experienced this situation.
The invoice goes out on time. The client knows they have X number of days to pay. That time comes and the money doesn’t arrive.
That means you have to chase the payment. The client gives you promises but it still hasn’t come.
You’re not running a bank here. You haven’t given the client a loan. You’ve provided a valuable service to that client and you should get paid on time and in full for that service.
If you’re not, you’re committing the sixth sin of agency owners.
The big symptom for this is a really easy one to catch.
You’re always chasing clients just to get paid. In fact, you’re chasing so much that you’ve had to hire someone whose main responsibility is to get their hands on those late payments.
The second symptom is that you’re taking your eye off the ball. You’re meant to focus on growing your agency and your team.
The more time you spend chasing invoice, the less time you spend growing the agency.
The final one is that your cash flow starts to dip. Remember that you don’t get to negotiate with your people on when they get paid. You can’t tell them that a client didn’t pay so they can’t get paid.
You’ve committed cash flow to get the job done. If you’re not getting that money back, that’s a symptom that you’ve committed this sin.
When do you stop servicing the client?
That’s the big problem that agencies have. If a client hasn’t paid for several months, do you keep plugging along while chasing the payment? Or, do you stop providing the service until you get what you’re owed?
Doing the latter has the potential to anger the client. And if it’s a big one, you may not want to hold the conversation. You worry that they may leave if you do, which is a huge dent to the agency.
All the while, your staff’s getting sick of you not dealing with the issue. You may even end up with people quitting the team.
The Root Cause
The root cause here often lies in allowing clients, especially the major ones, to control the payment cycle.
For example, you may have a big corporate client that tells you that they pay when they do because it’s their system.
How do you argue against that?
Ideally, you do it at the deal stage. You present three package options, with the middle one being the one you want them to choose. Then, you make all of the processes easier for them.
This helps you to build a relationship with the economic buyer, who’s the person you actually work with.
They become your insider champion whom you can use to escalate payment issues to the appropriate department.
Your champion helps you to bridge the corporate divide and achieve the payment terms you want.
Dev “Paid on Time” Basu