Payment structures | ANALYSIS


chosen designer by the point they decide to go ahead. It’s genuinely not that big of a deal to just ask for all of the money at that point.”


So if a customer asks why so much is required at that stage, what do you tell them? You could start by explaining that


products need to be ordered and payment could be due immediately; a lot of work has already been done for free – measure-up/site survey, design, specification, presentation; fitters need to be booked, and deliveries allocated. To reverse all of this if the customer changes their mind is expensive and time- consuming. So what then are the arguments against taking the payment upfront? The big one here is about trust. Having heard horror stories of companies going bust and rogue traders, many customers can be worried that they are about to give you a lot of money, when it could be many months before they have anything to show for it. This fear, despite your calm reassurances, undoubt edly makes closing the sale more difficult in some cases, and can be a deal- breaker in others.


I have found that offering some sort of compromise at this point can normally keep the deal afloat, and explaining the benefits of paying the deposit by credit card can really help too, although the card fees make this


January 2022 ·


then spend the money on something that was not completely necessary. It’s human nature, and not that easy to resist.


On the flip-side, what are the arguments for taking payment after delivery? There is no doubt that leaving large balances outstanding gives the customer peace of mind that you are going to deliver the project and will also help sales. How much of a difference this makes depends on the trust that the customer has in you and your business, but it certainly makes some difference.


Payment in advance is good from an operational and financial sense, payment on


completion is good for sales. Which is right for you? Toby Griffin


a less preferable option. Another small problem with front- loading payments is


strangely the


overly positive cash-flow image that it gives. Although we all do some kind of cash-flow forecasting, it can be tempting to just look at the bank balance on a given day, lick your lips,


In the case of account customers, for example tradespeople who might be


buying multiple kitchens and


bathrooms from you a month, loading all of the orders into one monthly statement can help to keep down the admin and, by aiding their cash-flow, they will be more inclined to order from you.


But what are the pitfalls of waiting for your payment? Well, as Ian Palmer, a designer at Umbermaster Kitchens in Kent, warns, snagging lists can become a real and never-ending problem with balances outstanding. “It’s interesting that even with an amount retained, some still want more,” he says. “It becomes the same conversation about trust and, yes, when a client is really attached to holding money back, you know


they probably have a plan.” I know from personal experience that, on average, the greater the balance outstanding, the longer the snagging lists. Not only that, new lists have a habit of appearing just when the last list is nearing completion. Trying to judge whether the client is just very particular, or in fact gearing up for some kind of discount, is an art. Being willing to take legal action can really help if discussions start to sour. A balance of less than £10,000 can be addressed cheaply and easily in the small claims court, without legal representation. I hope I have covered most of the arguments for and against a chosen payment structure, and there are, of course, a lot of other options and considerations. For example, finance, deposit protection schemes, custo- mers paying installers directly etc, but these are for another day. So let’s conclude by coming back to the two issues of risk and timing. Do you trust your customer to pay at the end of the job? Do they trust you to deliver as expected? Do you need the cash-flow? Do they have the money now?


Payment in advance is good from an operational and financial sense, payment on completion is good for sales. As business bosses, you must decide which is right for you. You pays your money, you takes your choice.


39


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68  |  Page 69  |  Page 70  |  Page 71  |  Page 72