In my “other practice” a majority of clients are having “cash flow” issues including one client I have as their “business adviser” for their Bookkeeping, Accounting and Auditing firm. This is just one case, but virtually ALL of the places I am “virtually” are filing more complaints and issues about not being able to reconcile Accounts Receivables, Invoices and even POS or Point of Sale transactions later “charge back”. Traditionally these go to a collections department in a big company, but what do we do when our “one person office” has such a large percentage of dead accounts. We “paradigm shift” do we not? If I’m observing this across the board in the last 60 days… it’s “melting” quickly out there as it’s my job to “know” before clients get stung.
I’ve noticed now if I go into a pub and even some restaurants, they treat me like it’s “fast food”. I suspect lower prices to compete in the current economy were the main “driver” to this. I’m reflecting on my last experience in a recession in the 80s where more than once I was asked to “leave the table” with my party so they could seat another “paying party”. Indeed, it was back in the 80s many changes in financial transaction procedures began. Hotels “blocked” out payment on your reservation by phone in advance for the full stay and gas stations started “pay first” before you pump. Also I’ve noticed that often my credit card is requested when I place my drink order. “Why”, I ask, “do you need my credit card now?” With a big smile and flip of some hair and hips, “we are just opening your tab now, that’s all”. Translation: “We want to make sure you are good for it now and not find out at the end of your meal you can’t pay”. Indeed, they “block” out about $100 in advance to “see if I’m good for it” before my drinks and meal come to the table. Have you noticed any of this?
I am eavesdropping and reading and “chat”ing with professionals who all do business over the Internet and 100% are now saying business has been drastically OFF the last 30-45 days and started declining 60-90 days back. A lady psychologist and friend has told me she has no new clients this year at all. For me personally, my number of clients is up, but my fee per invoice is down, BUT I’m surviving. Why? Lower fees for services and advance payment policies.
It’s time everyone moves to “advanced fee payment” cycles. I’ve advised clients to begin doing this. Net terms and credit cards are fast obsolete as we can’t risk discovering 90 days later that the client took services or products and now they are BK. Many people are shocked, humiliated and embarrassed as they discover their bank, no notice, cut their credit card limit significantly. These “surprises” are what is driving this change and my recommendation here to you. This is the best “free” consultation you’ll get from me this year. My advice is “our profession” should begin to take fees in advance, even legal firms, psychologists, CPAs and “me” are all doing this now just like the hotel, pub and gas station. If it’s a huge project, consider an “escrow” account similar to buying a house. If fees are over small claims limits locally, set that as the point to move to escrow with “terms” for payment and anything “under” that limit is “cash in advance” please. Once the work is complete it’s the mutual decision that requirements have been met. This works well for fixed fee contracts, but can also work for projects that expand outside of the original time and scope projected for completion. The idea is the clients want a result or solution and we want assurance they can pay for services. There is “risk” here, but it is not related to funds anymore if clients deposit the fee, the risk shifts to “ethics, quality, resolution, satisfaction” from all parties for your work. Collections agencies are a joke right now, over burdened and no way to collect from “defaults” where people can’t pay as the economic tidal wave slowly moves across America.
You also have an excellent option with escrow.com which more and more professionals are using. It’s gaining in popularity. Again, the client(s) deposits cash, you perform your “ombuds role” with a clear “self directed” result (service agreement terms) and the clients “release” payment from escrow.com account. They do take a percentage of the transaction based on amount of the transaction, but it’s worth it to “assure” payment and it’s tax deductible as “banking fees” for business. They will also “investigate” if you and the clients cannot come to terms, additional fees for this, but if it’s clear this is “self directed” then risks of additional disputes are lowered and the conclusion of the ADR services should happen without a negative consequence.
So, your choice, continue to bill… give net terms and hope to get paid or change your “habits” to up front advance fees and/or escrow procedures. These times require that we adapt to survive. All of my clients and myself now take payment in advance. My Bookkeeping, Accounting and Auditing client has had “no resistance” to this for all of May. I used to offer “half day” rates as a minimum block of time, lately I’ve offered 30 minute phone consultations to be more affordable and this scenario has “many takers” lately and is leading to longer term “commitments”, which is the goal.