How to get paid faster!
This is summarized from a small section of the “Work Smarter” chapter in The New Now: How to grow your production or postproduction business in a changed and changing world.
Never feel reluctant to invoice customers. You have done great work for them, helping make them more money (or you don’t have a future) so there’s no reason to feel the slightest bit embarrassed about wanting to be paid, and paid promptly.
Let’s consider the other side of the equation: if you want to be paid fast, pay fast yourself. Unless you never want to do business with a supplier or subcontractor again, keep the relationship good by paying when due, or ahead of when due. Doing so will keep the business relationship alive and improve your reputation. You’ll become a valued client of theirs and get preferential treatment if it ever comes down to a choice of doing business with you, or with someone else.
You are not a bank – reset your status with customers
If you find yourself getting strung out for payment then you need to reset the relationship. If necessary, go to those customers who are slowing payment and point out that you’re a production company, not a bank, and since you won’t be getting a big bail-out you rely on customers to pay promptly.
Make sure you make it clear you’ll run through hoops for the customer but you expect them to pay in a timely manner.
Tip for the Paranoid: Watermark all preview tapes, DVDs or files before payment has been received.
Talk about payment terms up front
You’re going to have to talk about it sometime and before you’re committed to the work is the best time. Unless payment terms are part of the agreement, customers can always claim they “didn’t know” or “we can’t do that”. If there is a genuine problem that their company cannot pay on your terms, this is the time to negotiate it, not when the job is complete.
Know your profitable customers
Do you know how much each client’s payment cycle costs you?
In a post at Howard Mann’s Business Brickyard, Colleen Barrett – former President of Southwest Airlines – has this story to tell about examining the profitability of each customer based in part on payment history.
Send your invoice promptly
In a small production or postproduction business, it’s the video work that interests most of us. The fact that we have to run a business as well is kind of a drag. One consequence is that invoices don’t get sent out promptly. Realistically you can’t expect anyone to pay until they have the invoice, so get the invoice out the door as quickly after the client accepts the work as possible.
Important: I’m talking about tried and true customers here. If you’re working with a totally new customer stick to the traditional policy of 30% payment of budget when work commences; 30% at the completion of production (or suitable postproduction milestone, like first draft assembly) and the balance of 40% due on completion. For new customers it’s very unwise to let the master out to the customer until payment has been made (and cleared the bank).
Avoid the mail
Once you let the postal system have control over your invoice you don’t know when it was received unless you take out receipt confirmation, which requires a trip to the post office for each invoice. Not fun. Instead, email the invoice and ask the client to confirm receipt. If you don’t hear back within a day or so, follow up with another email or phone call to confirm that the invoice has been received and that there are no problems with it.
Know the client’s payment process
The larger the company, the more complicated getting paid is. Know their system so you can work with it to your advantage, or at least not make payment unnecessarily slow because of a mistake at your end.
Offer a discount
Depending on your jurisdiction many Utilities and Government bodies are legally obliged to take advantage of any discounts offered.
Make your invoices pleasant
Invoices are a fact of life but make them appealing. Get the person who designed your logo and stationary to design the invoice. Make it look attractive and look like your company.
If you have a relatively small number of customers, like we typically do in production and postproduction, then take the time to write a personal message with the invoice (in the email or an accompanying letter). Make it some funny quote, or poignant statement about the industry, or something relevant to the customer’s business. By including something pleasant you can eventually make people look forward to your invoice. It can be the same message on every invoice, although change it at least every month.
Systematically follow up every invoice
Simply sending out a ‘Past Due’ notice and subsequent monthly statements isn’t going to cause a company deliberately delaying payment any stress or pressure. We’re enabling their poor behavior!
Never let copyright pass until you’re paid in full
One of the things I learnt painfully, was to put a clause in the agreement (never a contract, that scares people) such that copyright in the work did not pass to the client until payment was received in full.
It’s a blunt instrument, and only really useful when the relationship has broken down and future work is unlikely, but it ups the ante because willful breach of copyright has penalties attached that inadvertent breaching does not.