#191 - 3 ways to ensure you get paid in your creative business
We all know cashflow is the cornerstone for every small business. So having processes in place to reduce your risk when it comes to setting your business up for success and getting your invoices paid is more important than ever.
Let's face it: no one wants to go down the path of debt recovery because the time, energy and money associated with chasing unpaid debts usually far outweighs the value to the business. Particularly when we take into account the time the business owner has to spend away from revenue generating activities, taking their eye off the ball to deal with unpaid invoices. Not to mention the money they've got to pay out to the lawyers to take care of it.
As you know, I'm all about prevention being better than cure in business, and about taking proactive steps to avoid having to call a lawyer later when something's gone wrong.
So, let me share with you three tried and tested strategies that will protect your creative business and ensure you’re getting paid on time, every time.
1. Tailored Client Service Agreements with Aligned Scope of Work
One of the foundational elements of running a successful creative business is having properly tailored client service agreements alongside an aligned scope of work document. It’s something I preach often, because there’s no one-size-fits-all when it comes to contracts. Your documents need to be as unique as your business.
Your client service agreements should clearly outline what services you’re providing, how and when you’re going to charge for them. Set expectations right from the get-go. This means specifying if you’ll require a deposit, if you bill via progress payments or only once the project is completed. Communicate these clearly to avoid any confusion or scope creep down the line.
2. Rock-Solid Processes and Systems
Next, ensure you follow through with what you've laid out in your agreements by having robust processes and systems in place. It sounds simple, but many creatives get so caught up in the artistry they forget the admin side – and that’s where problems arise. Make sure to send invoices on time, follow up if payments are outstanding and have a system that flags when an invoice hasn’t been paid.
One essential practice is to send the final invoice before handing over the complete work. But remember, this needs to be clearly stated in your agreement. It's fair, transparent and ensures you maintain leverage to collect payments smoothly.
3. Ability to Cease Services for Unpaid Invoices
Lastly, your agreements should empower you with the ability to stop providing services if invoices remain unpaid. It might sound harsh, but having this clause allows you to protect your business from being financially strained or overworked without compensation. By clearly stating this in your client agreements, you’re setting the expectation and keeping both parties accountable.
By implementing these strategies, you position your creative business for consistent cash flow and prevent the messy, often costly, debt recovery process. I hope you find these tips invaluable in helping you stay focused on your creative genius, delivering stellar services to clients who are excited and willing to pay on time.
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Tracey: [00:00:00] Hello everyone. Welcome back to the Rise Up in Business podcast. It's no surprise to any of us as business owners to hear that the amount of small business debt accumulated in Australia is at astronomically high levels. That includes business to business debt, and it includes ATO debt. As a litigator in the first part of my career, I spent all my time, about 12 years, acting for businesses who were suing or being sued, involved in disputes, mainly to do with money.
And part of the work that I did involved debt recovery. So it involved businesses suing for breach [00:01:00] of contract on debt. It involved unpaid invoices. There's a whole raft of things, but to do with money. We all know cashflow is the cornerstone for every small business.
So having processes in place to reduce your risk when it comes to getting paid and to set your business up for success, to get paid on time, every time is more important than ever. I'm going to share with you in today's episode, three strategies that you can employ now in your creative business to make sure you're getting paid.
And I'm sharing these strategies with you because I know from experience with working with my creative clients that they are tried and tested. And I'm drawing from my experience as a litigator to help you put in place what I know works to keep you out of that debt recovery space.
Let's face it. No one wants to go down the path of a debt [00:02:00] recovery because the time, the energy, and the money associated with chasing unpaid debts far outweighs the value to the business, most of the time. Particularly when we take into account the time the business owner has to spend away from revenue generating activities, taking their eye off the ball to deal with unpaid invoices, and then the money they've got to pay out to the lawyers to take care of it.
It's just not worth it. And as you know, I'm all about prevention's better than cure in business, and I'm all about taking proactive steps to avoid having to call a lawyer later when something's gone wrong. So that means to avoid having to call a lawyer because you need help recovering debts from clients.
We don't want to go there. So let's dive in. The first thing I want to share with you is the importance of tailored client service agreements with an aligned scope of work document. So I talk on this [00:03:00] podcast all the time about the importance of tailored legals, about the importance of having your client service agreements tailored for your business so that they work for the way that your business works. They've got to work. There's no one size fits all and there's no two businesses that are the same. So what works for you may not work for your friend down the road because you both operate internally very differently. Having tailored client service agreements that work in conjunction with your tailored Scope of Works document is vital.
If you want your documents to be worth the paper they're written on, then they need to work together and you need to have a Scope of Work document for your client that clearly sets out what it is you're going to do, what it is you're going to charge, what you're not doing. We don't want to go into scope creep. I'm not going to talk about scope creep in today's episode. I've talked about that in previous episodes, but we want to avoid that and you can, quite easily by making it crystal clear, what services you're providing for your clients [00:04:00] and in what circumstances you're going to charge extra. So variations. But going back to today's theme of making sure you're getting paid in your creative business, making sure your client service agreement is tailored for you and that it works with your scope of work document and the two marry up really well is vital.
So what services are you providing? How are you going to charge? Do you require a deposit? Do you charge in progress payments? Do you charge up front? How do you charge? Set it out in those client service agreements and make sure it aligns with what you've set out in your scope of work. Some clients call it a proposal.
Others call it a scope of work, whatever it is that you're tailoring for the client so they know what they're getting from you for their project. When are those milestones to be met? When will invoices be issued? Set it all out in crystal clear terms from the beginning. And if you're doing an hourly rate, that's okay, because you outline that too, to say, we'll be charging on an hourly rate and we'll issue invoices [00:05:00] monthly, for example.
But make sure it's outlined really, really clearly so that the client's expectations can be managed around invoices and payments. In my experience, you are setting yourself up for success with your clients when they know when to expect invoices from you, and when they know what those invoices are going to be for, how much, what amount will those invoices be?
Again, if you're charging on an hourly rate or you're dealing with variations, keep the communication flowing. Always. This is where we're up to. Just a heads up, just letting you know, this is where we're at. Here's the next progress payment. Keep the communication flowing. Crystal clear communication wins every time.
So we want to make sure that when your clients s receive your invoices, they're so happy to pay them because they knew that the invoice was coming, you've been providing outstanding services and they're only too happy to continue paying. That's what we want to achieve and you can do that. So the first step here is to make sure that you've got tailored client service agreements that [00:06:00] work and that are consistent with your proposal or your scope of work document. The second way to ensure that you're going to get paid every time in your creative business is to make sure then that once you've got those tailored client service agreements and scope of work documents out to your client, that you've got solid processes and systems to follow up to walk the walk. So you've talked the talk in the client service agreement and the scope of work. It's now time to walk the walk. And that's the processes and systems. If you've said to your client, you will require a deposit, make sure that invoice goes out requesting a deposit. If you've said to your clients, you're going to invoice at the end of each milestone, make sure that you do. Make sure you follow through with what it is you've outlined in your client service agreement so that your clients' expectations are being met and they're only too happy to pay the invoices. This might sound like a no brainer. This might sound so obvious, but Tracey, [00:07:00] why are you even saying that, of course. But no, it is not so obvious and in my experience working with creatives, creatives get so engrossed in the beautiful work that they're doing because they're creatives. It's so easy to get so focused on a project that everything else falls to the wayside, all the admin falls to the wayside, and you simply forget or overlook sending your invoices.
It happens more often than you would care to think. That, though, puts you in the bind that when you do surface for air, when you do come back into admin space and start issuing those invoices, the clients are not happy because you haven't invoiced when you said you would, and they don't like receiving bigger invoices or invoices close together later.
So they're less inclined to pay them on time. You run the risk of clients tending to think that if you're not going to follow through with your processes, as you say, as the business owner, then why should they? Trust me, this is something that you want to stay as far away from as you can, and it's possible to do that.
And [00:08:00] that is by having your processes and systems set up so nothing falls through the cracks. It might take a little time and I get that. It might take a little time to get these processes and systems set up properly. You might need to work with the right support, the right mentor, the right coach, whatever it is, the right VA to help you set these up.
But that is an investment that's worth its weight in gold. The return on that investment is never ending because there is no substitute for the value in getting paid invoices on time every time in your business. And if you have to invest some time and money at the front end to set that up, it's one of the best investments you'll make in your business.
So those processes and systems are really important. You need to make sure that you have a process in place, this is a big one, whereby your final invoice is issued before handover or before completion. Hand on heart, this is probably one of the biggest nuggets of gold for you in this episode. You [00:09:00] can issue your invoices before handover, before final presentation, before install.
Before you hand over the final files, you can do that, provided you have said so in the client service agreement. So you need to say it there in order for it to be lawful. You can't be silent on these things and then end up in a situation where the client feels like you're holding their final files or their final presentation ransom until they pay your invoice. That is not a position you want to be in. It's not aligned. It feels awful. It's not the way to exceed client expectations and end up in a situation where you're getting lovely referral word of mouth work. Don't do that. You don't have to end up there though.
My point is again, going back to the importance of the tailored client service agreement, set all of this out in advance for the clients so they know they're going to receive their final invoice before the files are released or before install or whatever it might be for your [00:10:00] particular creative business.
If you say it in the client service agreement and then you have a process in place to make sure that all the invoices are issued on time throughout the project, everything's being paid on time, every time. Fantastic. And then the final invoice goes out. Before completion. Perfect. Perfect. That's the position we want to be in.
Now the third and equally as important point I want to share about things you can do to make sure you're getting paid in your creative business is to have the ability to cease services, if your invoices aren't paid. You get that ability through including it in your client service agreement, where you say, if for any reason my invoices remain unpaid, or if there's any outstanding invoices, we have the right to cease providing services.
So to stop work. You need to have that in the client agreement, so then, if it happens, you can stop work until the issue is sorted and until you're [00:11:00] paid. It is not going to help you one bit in terms of cash flow and workflow if you keep working and you keep doing the work and providing the services, even though invoices are outstanding, because then you're on the back foot, chasing the invoices. And that doesn't end well. In my experience, that doesn't end well and those are the times you often need to reach out to a lawyer to get help. And I've shared at the beginning why you want to avoid that and you can. So making sure in your client service agreements and your legals, that you have the right to stop work or to cease providing those services if an amount is unpaid is crucial. If you have that clearly outlined in your client service agreement, then fair's fair. And then you are able to write to your client to say, for whatever reason you've stopped paying, we can't continue. And then of course you can deal with delays and restart fees and things like that.
Absolutely. Again, tailored to your business because no two businesses are the [00:12:00] same. So you can see all of these points that I'm sharing with you are really important and they feed off each other. So the client service agreement needs to be tailored. It needs to work for your business. It needs to be read in conjunction with an aligned scope of work or proposal, so that the two documents work together.
They form the contract. You then need to make sure you've got solid processes and systems in place where you do the things you say you're going to do in the service agreement. Simple as that. Have the follow through. Make sure you're doing the things you say you're going to do and make sure your processes and systems are designed to flag with you when it's time to issue an invoice and when it's time to follow up invoices if one hasn't been paid because that's key for you to then realize early on that an invoice remains outstanding. Hey, what's going on? We're going to stop work until this is sorted out. You're absolutely then entitled to do it. You will run into difficulty if you don't have that in your agreement and that's what you want to do. Some clients say to me, no, [00:13:00] Tracey, that's not what I want to do. That's not how I run my business.
Well, that's fine. Whatever works for you again, it all comes down to tailoring. But if you want the ability to stop providing the services, you need to make sure you've explained to the client, that's what you're going to do if the invoices aren't paid. My friends, that is how you avoid getting into a situation where you need to reach out to a lawyer for help with debt recovery, because things have fallen through the cracks.
And you're now in a situation where you've got significant invoices outstanding and no leverage and you need to go down a very expensive and time consuming path of debt recovery and even worse, litigation. Honestly, you want to stay away from that as much as absolutely possible and you can, that's the good news.
You absolutely can. And that's why I'm sharing this with you. So let's recap. Your creative business. Do you have tailored client service agreement in place? The agreement that you issue to your clients. Is it tailored? Does it work? Is it up to date? Does it issue with a tailored scope of work or proposal [00:14:00] document?
Do they work together? Is the language consistent? Then your processes and systems, are they set up so things don't fall through the cracks? Invoices get issued when you say you're going to issue them and you've got a process in place to flag outstanding invoices so you can nip that in the bud and you can deal with the issue really quickly so you can continue on providing amazing services.
For your clients so that you can not only meet their expectations, but exceed them. So we want the focus to be on the service delivery. We want the focus to be on your zone of genius. And if you set the admin up properly, it can be. And you can have smooth, reliable cashflow every time. I really hope you found this episode helpful.
You can tell I love talking about this topic. I love setting business owners up for success so that they can avoid what I saw all too often in that earlier part of my career. I've loved sharing this with you. If you've enjoyed this episode, if you feel like it's delivered value, please feel free to share [00:15:00] far and wide within your community and your business circles. Together that is how we help the podcast get into the ease of even more business owners to add value everywhere I possibly can. Thank you so much for joining me. I appreciate your time and I'll catch you next week.
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