Have you ever wondered…How do accountants charge upfront for their services when so much of their work is performed after the fact?
It might surprise you to learn that many accountants actually bill their clients AFTER the work is done. The problem is then they find themselves with another whole job: collecting payments.
In fact, one of my students told me that he had more than $60,000 in accounts receivable just waiting for clients to pay!
I say that’s CRAZY.
You should be able to use that time instead to serve your clients and help save them money on their taxes.
That’s why I advocate for clients to pay you up front for all services that you provide. In this blog post, we’re going to talk about why clients should pay prior to services being started, and how you can shift your firm and start charging upfront.
If you’re sick of feeling like a bill collection company, then this blog post is for you.
What are the Benefits of Being Paid Up Front?
There are a number of reasons why getting paid up front for your services is beneficial.
You know that I love working with accountants, but this example comes from a leadership training that I recently took. When I signed up for the training, I had to pay in full before I could start any of the training! I didn’t take the training and pay afterwards.
There are a lot of industries that send a bill afterwards, like doctors. They end up spending a lot of time working with collections to get the payment for the services that they have already provided.
But that isn’t how you have to operate your firm.
When I was with my old company, I had to pay up front when we did a store build out. I had to think like a general contractor: no one is going to build you a house or a store without you paying first!
I didn’t get the rendering of the retail space until after I had paid 50% of the total costs – and this wasn’t even approved by the city yet! Before the company broke ground on construction, I had to pay the other 50%.
When you get paid up front, you are bringing in the cash flow immediately. This is especially helpful for covering your expenses, let alone never having to chase clients to pay their bills.
When you get paid up front, you know exactly where the money is and won’t have to go chase it down when you need it! It also frees up time to focus on delivering the service to your clients.
How Can I Change My Current Payments?
If you already have clients that pay you after the work is done, you may see some resistance to change. After all, people usually don’t like change.
By taking baby steps, you can slowly change how you work with people. It may take a little bit of flexibility to make the shift, but you can change how you run your business.
If you have clients with monthly services like bookkeeping, then send them a bill the 1st of the month for the full month’s work.
Or, you can be like the general contractor I worked with for my old business and go with a 50/50 plan.
If you are working with a client on tax planning, send them a bill for 50% before you start working on it. Then, before you deliver the end result to them, send them a bill for the final 50% and require that it be paid before you release the documents.
You know your clients: if you know that they are in the middle of a cash flow crunch, then change it up a little! Send them an invoice for a sizable deposit for their work and get started. Then you can collect the rest of the payment at the end.
Ultimately, you will be able to quickly see what is going to work for you and your business.
Additionally, being transparent with your clients will help you in the process of transitioning to upfront payments. If clients are hesitant – and some will be – knowing what to expect, and what you do (and do not) provide helps build trust.
Create very clear outlines in your engagement letters so that they see and know exactly how you are serving them, and they will trust you in this process!
As you’re building that trust with them, they’ll be able to see just how much you are serving them and their needs.
Results of Changing to Upfront Payment Before Working
The time that you are currently spending chasing down payments can be spent on higher value things. In fact, the time that you spend chasing down payments is a waste of your time.
If you want a life of abundance, and a firm of abundance, then you are going to have to change the way that your firm operates.
Imagine the value you could bring to your client if you didn’t have to chase down payments, and spent that time working on finding ways that you could better serve them? You would also be less stressed, more calm and more at ease.
What if, instead of chasing down $60,000 worth of payments for work you have already completed, you were able to spend that time following up with other leads, bringing in new work? This time is invaluable.
Asking for payment in advance also elevates your value.
One of my students from my 8 Week Sales Mastery Training, Luke, operates an incredibly efficient firm. When he begins working with a new client, they are asked if they are willing to sign up for an automatic ACH payment system. If they refuse, he doesn’t work with them. It’s as simple as that!
He set up tight boundaries, and it’s paid off. His firm is efficient, and none of his time is spent calling clients or looking for payments. It’s a win-win. He’s able to spend that time constantly serving his clients.
By having clients pay up front, you are building trust.
But what do you do when clients balk at the idea?
You can easily respond with “Well, I really want to serve you to the highest level, and having you pay in advance for our monthly services makes this process smooth and easy and allows me to spend more time with you and your business.”
Not only that, but it allows you more time to make sure their books are in order, and even save them more money in taxes!
If you’re willing to try something new and push through objections, you’ll see the results in your business!
Overcoming Objections to Paying Up Front
Some clients will object to paying up front. However, there are ways to work past those objections.
Flexibility in the transition period, for example, will help. If you’ve been billing after services were completed, then moving to a 50% deposit and 50% payment due prior to delivery of services system will help with transitioning your clients.
Another way to help your clients trust you in the process would be to offer a money back guarantee.
About half of the CPAs and accountants that I work with offer a money-back guarantee. They under promise and over deliver!
You can offer that guarantee because you’re confident in what you’re promising to deliver, and your client will begin to trust you more.
Sometimes that money back guarantee eases the mind of your clients, especially new clients, who are learning to trust you and what you have to offer.
You may have 100 clients who are used to getting an invoice after you’ve completed the work, and that will be a transition.
If they aren’t willing to make the transition to paying up front, that’s ok! You can always refer them to another accountant who can serve them. This will allow you to find the right kind of clients for your firm.
Do you spend a lot of time chasing down payments from clients? What would happen in your firm if you were to modify when you charge your clients?