Man up! Why you must take card payments to increase cash-flow in your service business

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Earlier on in the year a friend of a friend came to me to ask me for advice about setting up a building and refurbishment company. I spent several hours in the pub trying to talk him out of it but he was adamant and so I passed on a few pearls. The advice got more convoluted as the night went on but the key point I kept pushing was cash-flow. I told him that in a small, locally focused business like his, it was going to be even more important than sales in the early stages and that he needed to think about how he was going to get paid for the jobs he did right now and before he had started them.

Bumping into him a couple of months later, I was still surprised at how quickly he had managed to run up a list a debtors. Having completed 13 jobs he still had 5 people who hadn’t paid – in full at any rate. What wasn’t a surprise was that it was already having a chronic affect on his business – he had run out of cash and he was experiencing a very nasty cash-flow problem. He couldn’t pay his guys on his current job, he couldn’t even purchase the materials for it even though he had taken the customer’s deposit. Massively stressful but we’ve all been there.

So what to do? Well, a loan was the short-term solution to ease his cash-flow crisis but things couldn’t go on like this. Of course, he was already using Flobot (I’m all heart!) to manage his customers, build the quotes, issue invoices etc. and he was set-up to take card payments into the system but he wasn’t using it and I wondered why. It turned out that he simply didn’t feel comfortable asking the client for card details for larger projects. He told me that they feel more comfortable making a payment via BACS straight into his bank account.

Of course they do! A bank transfer of money is the 21st Century equivalent of ‘the cheque is in the post’. For you, the contractor it’s passive and leaves control of payments in the hands of the client – they decide when and when they don’t go in. It’s also very time consuming because you keep having to log into your online banking account to see when the funds have arrived. This isn’t practical for a one man band.

I told him to ‘man-up’ get the card details for the deposit and take back control of the client payments. (‘Woman-up’ is probably a better phrase, generally they are better at getting money from people). Now, that doesn’t give you license to run your client’s card frivolously and you still need to talk to your client about payments or you will find yourself on the wrong end of a retaliatory charge-back (the subject for yet another article). But it does mean making a conscious decision to engage with the client at the earliest opportunity about payment – something that we are not very good at doing in Britain (I wonder if this really is just a British thing?). For large projects that means getting a deposit and agreeing stages that once complete will trigger a payment. Or in a smaller job telling them that payment is due upon completion – your invoice will be issued at the same time as your payment receipt.

But it got me to thinking that this might be a difficult subject for a lot of people to broach with their client. After all, at the beginning everyone wants the relationship to prosper and the job to go well and so it’s human nature to invest a certain amount of good-will and this is usually at the expense of that awkward conversation. What if there was another way?

And so after talking to the guys in the office we came up with what I think is a pretty neat solution that is specific to Flobot. I’ll talk you through it. In the settings on Flobot you can switch the toggle to ‘automatically open a client portal’ as soon as you create an order. This sends the customer a password and login for their own unique space on your account, somewhere you can share documents, pictures, invoices, job details etc. with them. But the client can also make payments for services, materials and deposits into the system online – just like Amazon. Now, once you’ve built your quote and the client has agreed to go ahead, you just send them a deposit request through the system and it pings them an email allowing them to pay securely online – just like everyone pays for goods on eBay and Amazon every day.

No more awkward conversation and now you know that you really do have that deposit in your account, with a valid card on file should the worst come to the worst for final payment. Powerful stuff that could save you from a few sleepless nights.

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