Whether you are an entrepreneur or a freelancer, you are certainly involved in the service sector. However, it is not always easy, if you take into account the management of down payments. Beginners often struggle in this field, and without help, they risk going bankrupt before they have even been able to flourish. Fortunately, there is a solution: adopt the right method of down payment management.
Suppose you have a beautiful project on the horizon, and the excitement is such that you start before you even receive the first down payment! Days pass, the customer is slow, and you still don't see anything on your account... What can I do? To avoid this kind of situation, I share my experience with you:
Filter unscrupulous customers in advance with down payment
Working with down payments can be used to "filter" customers. You only hold back the good ones, and the bad ones will leave of their own free will. Indeed, the attitude of the prospect when you ask him for a down payment says a lot about the kind of adventure in which you are about to embark!
But when setting your down payment, be cunning, and ask for no less than 30%. And if you've already done a few projects for the client, and you feel ready, consider increasing the first down payment to 50% or even 75%.
Be PRO, that's what you're doing by asking for a down payment
There are a thousand and one ways to show a customer that you are professional, but one of them is to ask for a down payment. In doing so, you are putting your insurance into practice. In addition, if the customer is B2B, he will have the habit of paying down payments before each mission; for him, the fact that his providers ask him is therefore normal! And what will he think if you don't demand it?
Keep your cash flow healthy
Cash flow, also known as: Cash Flow (Wikipedia) is vital to your business. By owning one, you will have a turnover of your fixed costs (salary, rent, subscriptions...) and your variable costs (purchases, investments...).
However, if you do not ask for a down payment, you will have to draw on your reserves to meet your fixed and variable costs. However, your reserves are intended for a future investment or simply for the prevention of taxation of your remuneration.
How I manage my down payment: the "Sandwich" method
Every business should have its own method of managing down payments. I explain how I do it for my business: creating a website.
Sandwich base: 1st down payment: 50%
I send a pro forma of the total, and ask 50% down payment. As soon as I receive the down payment, I send the equivalent down payment invoice.
Inside the sandwich: 2nd down payment: 25%
Once the model is approved and the design is ready for production, I ask for a second down payment. I also keep track of the bill.
Sandwich closure: Remaining 25% balance
When the website is ready for online and I have all the approvals, I ask for the balance to make the website go online.
This method suits me and at the same time reassures the customer. It is a method that I have been applying for a few years and so far it has worked very well. So I invite you to do the same, with possible adaptations in your own way. 🥪
Asking for several down payments will make your life easier, because fiscally speaking, you will be quieter! Indeed, a large project will be split into several pieces. As a result, the large tax costs will be reduced; down payment bills being made as you go along.
Have you noticed the practicality of the "sandwich" method? If you don't do it yet, isn't it time to do it? You will see, you will be more serene in your work! The customers you deal with will also, without question, be understanding, and this will put your collaboration in good conditions.
Come back to this page whenever you want. Have you found any advice That I might have forgotten to write? If so, what are they? Leave a comment below or email firstname.lastname@example.org.
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