One of the dangers of business is collection - getting paid, especially with small business that do not have that large a capital to sustain operations. One way to curb this danger is to ask for a deposit or down payment for the service or product.

While it can be a turn-off to customers if handled badly, it’s an opportunity for cash inflow often missed. The money’s going to spent wisely anyway, either for securing products or funding initial expenses. This way, you aren’t spending your own money upfront.

As a consumer we probably don’t mind this at all since we feel that, having paid a deposit, we can assure that everything will be delivered on time. And most often we do get a satisfactory service. It’s the same with our potential customers and clients when we ask for the deposit. All we have to do is to assure them of excellent service. I, myself, wouldn’t mind putting down as much as 50% upfront as long as the delivery is assured.

A lot of freelancers often miss out on this too. They often they shell out money for operating expenses during the duration of the project. They only get paid in full after every thing’s finished. This is why it’s important to get payment terms settled and in black and white. Some clients may be cautious of this, so the least you can do is to negotiate payment terms.

If you are already in business and deciding to shift to this model, be sure to send out notices that you have a new policy.