I’ve seen some advice that a creative entrepreneur should ALWAYS require first payment to be made PRIOR to starting a project. While I understand the positive intention behind this advice, I don’t agree that it should be a required policy for your business. Here are few things to consider when a client wants to delay making first payment and it is all based on trust.
If you don’t trust the client to pay, should you be working with them at all?
Think about this for a moment. If you are worried that the client won’t pay you as detailed in your contract, have you properly vetted the client? Do you really want to be working with people who might not pay you as agreed? In all my business dealings over the past 25 years, the thought of not paying what I agreed to never entered my mind. It is called business ethics and you should be vetting your clients for it during your sales process. Work with people who have some integrity and the concern of “not getting paid” won’t be a problem. Now, since there are a lot of entrepreneurs with questionable ethics out there, let’s look at
If you trust them, get started.
If you trust the client to pay, then you can begin a project without requiring payment prior to start. For example, if you’ve had a client for three years and you’ve done many great projects together and they say something like, “We will have access to our new budget in a couple weeks but we would like to get started now.” In this situation you can proceed, if you choose, trusting that the client will pay. The behavior in the past is a good indicator of what their behavior will be in the future.
Here is another example. At my agency we did a ton of work for Google. I never worried about Google’s ability to pay. They have a robust accounts payable system that usually took a bit of time to get through before we had a check in hand. (In fact, many of the projects we did for Google were not paid until completion of the project.) I never held a Google project hostage, “We won’t start until we have payment” in fear that they wouldn’t pay. I trusted the company, as I should have, and we started projects for them as quickly as they approved the contract.
If you have some payment concerns, stand your ground.
However, if you have a low degree of trust with the client, then it is advised to require first payment prior to starting on the project for them. This is an appropriate response, “It is our standard business practice to require payment before we begin working on the project. When do you think you can have that first payment made?” Based on their response you can decide if you are willing to risk some of your time prior to payment.
Someone is risking something.
WE RISK OUR TIME: When a client hasn’t paid and we begin working we are risking our time with the expectation that they will deliver payment (as agreed).
THEY RISK THEIR MONEY: When the client pays us something before we begin working, the client is risking their money with the expectation that we will deliver work to them (as agreed).
Either way, someone is risking something. You are risking not getting paid or the client is risking not getting work.
In my opinion, it is ok to have a little bit of “slush” with first payment but I never recommend getting too deep into a project without seeing some of their money in my bank account.