Billing Customers as a New Business: Keeping Your Customers and Your Bottom Line Happy
Billing customers and being paid on time is vital to a new business, here’s how to have confidence in your prices and get paid fast
As a new business, sales are key to success, but billing customers can make some business owners uneasy. You may not have a sufficient gauge of your market, resulting in a lack of confidence in your prices, worrying that they are too high or feeling desperate to please your valued new customers, while neglecting to ensure prompt payment at a price consistent with the value you provide to the customer. This short guide will help you avoid the pitfalls many new business owners make.
Have a clear pricing plan and stick to it
One of the biggest and most common mistakes made by new businesses is being too malleable with their invoicing. In the early days customers are often granted too much control over your business model and take liberties over how and when they pay you for your work. This is a mistake I made when first starting out; I found my first client and in my excitement to have a customer, I neglected to go in with clear conditions set out and allowed the client to dictate the payment terms, agreeing to settle after the project was complete. As a result I spent immense effort building the perfect website and unfortunately was never paid for my hard graft. Although we’d like to think everyone is honest in business, many will take advantage if given the opportunity.
If you don’t ensure clearly defined payment times your business may soon face significant cash flow problems. Not knowing when your next payment will arrive limits your ability to plan the future of your company and puts you at risk of unexpected expenses severely damaging your ability to operate, without the cash reserves to compensate.
One way to counter overdue payments is to have a clearly predefined agreement with the customer right from the start. This is not only good for you; the customer will also appreciate knowing where they stand. Make sure you confirm all arrangements in writing so you have something to refer to if the customer tries to change the terms and to ensure the customer know exactly what to expect from you, this doesn’t necessarily have to be a written contract, just some sort of paper trail, an email exchange detailing the plan should be sufficient.
Your terms can be whatever you like, provided it is clear across the board what these terms are, make sure you, your staff and your customers know how you operate. One effective way of ensuring both you and your customer feel safe in the agreement, is to take a percentage of the total balance before and the remainder after the product is delivered – this is generally applicable for service based businesses.
As well as ensuring your customers are sticking to the invoice dates, it is just as important that you as a business are consistent in meeting your promised deadlines and competing projects on time and to a high standard. If your customer feels cheated or that you do not stick to your word, they are less likely to feel obligated to theirs.
Deciding on a price
Another aspect when it comes to billing is what you charge the customer. It can be tempting as a new business to undervalue your service or product to get customers through the door. Competitive pricing is one thing, but undervaluing your value in a market place is dangerous to the life blood of your budding enterprise. Research all of your expenses thoroughly, including your limited time and come to a sustainable price, that allows for growth.
Offering a product cheap may win you customers to begin with, but you are likely to end up working day and night and never really getting ahead. This strategy may work for cheap products sold in bulk, but as a small start up you are unlikely to be immediately selling sufficient quantity or have the requisite time to deliver consistently. In my experience customers would rather pay a little extra and know they are getting something of high quality, rather than a cheap product that isn’t up to the mark.
Often low paying customers expect the same standards, taking up the equivalent or even more time with phone calls and alteration requests than high paying customers, so choose a slightly higher paying happy target market over a low paying dissatisfied one. It’s true that you may lose a customer or two who are purely focused on the cheapest option, but personally I’d rather let the other guy pull his hair out trying to meet high demands for little reward.