View Single Post
  #17  
Old 01-16-2013, 01:04 PM
Sean Adams Sean Adams is offline
 
Join Date: Jun 1999
Location: Pennsylvania
Posts: 3,623
Sorry I did not get back to this thread sooner.

As far as the idea/argument that all the money comes in one way or another, so why does it matter if you bill in equal monthly installments versus billing for work as completed, my answer is this in no particular order of importance:

1.) Budgeting. If you know every single month that your clients (or most of your clients) are going to make the same payment amount, without fail, within the first 5 days of the month, you can plan and project with that in mind. If you kow $8,333 will be in the bank by the 5th of each month, you know what you have to work with, you can pay your bills on time, always have needed funds for payroll and tax obligations and rarely deal with a surprise you can't handle (equipment goes down, truck goes down, etc.).

2.) Discipline. I understand the premise that if you generate $100,000 a year in revenue that eventually it will all come in, but if that money arrives every single month in the amount of $8,333 then you know you have that much to work with and nothing more. Business owners have a tendency to see a pile of money in the bank and for some reason feel the need to spend it, usually on the unnecessary.

3.) Reinvestment. If you are waiting for money to come in, or money only comes in from the months of May to October, it is significantly more difficult to pull the trigger on an investment in the business that requires payment 12 months of the year. For example, if it is July and you have the opportunity to bid on a large project that will require the investment of another truck and some equipment, it is easier to manage and plan for this investment if you know every month the same amount of money is coming in. I have also found that when consistent money arrives due to monthly payments, business owners are now more inclined to advertise 12 months out of the year versus the spring rush. This allows the business to grow.

4.) Customers. If you do the majority of your work for a client in the months of April, May and June (and therefore the checks they have to write you are larger), they are less inclined to put you at the top of their payment list. In some instances, you may not even get paid at all. But when a client knows that all of their needs will be tended to and they are only going to have to write a $400 check each month, it eliminates the sticker shock of getting one bill for $2,400 in June.

5.) Sleep. It is just easier on the mind knowing that each month a significant portion of the money owed to you is going to come in a timely manner versus sending out invoices and wondering if and when people are going to pay you. Afterall, your employees and vendors and bill collectors do not care if clients don't honor their obligations. They want paid.
Reply With Quote
 
Page generated in 0.03716 seconds with 7 queries