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Profit & Growth Tips for Digital Agencies

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How Your Digital Agency Can Get Paid Faster

Posted by Nicolas Jacobeus on Jul 27, 2016


One of the major limitations of agency growth is unpredictable cash flow. Even when your agency is working at full capacity on billable work for your clients, if you’re not being paid promptly then cash flow will still be a problem.

Today I’m looking at 4 things you can do to encourage your clients to pay their invoices sooner, to improve your agency’s cash flow.

What are the Main Reasons for Payment Delays?

There are a variety of reasons why your clients might be delaying making payment to your agency. But in my experience I’ve found there are a few common reasons for delayed or late payments:

  • Your client has cash flow problems of their own – this is more common when working with small, early-stage companies rather than larger, more established ones. If money’s tight for your client, they’re likely to delay paying your agency to ease their own cash flow problems.
  • Your payment is tied down in bureaucracy – this is more common when you’re working with bigger clients who might have their own finance department, and will have lots of processes in place that need to be done before they make payment to you.
  • Your client doesn’t believe the project is completed – in this case, the problem is as much with your agency as it is with your client. It means the scope of the project wasn’t clearly defined from the outset, leaving you with some tricky negotiation to do before you get sign-off on the project and your client is happy to pay.

How Your Agency Can Minimise the Risk of Payment Delays

1) Establish and Maintain a Good Client Relationship

If your client is happy with your agency, and the work you’ve done for them, they’re less likely to delay paying you than if they’re not entirely satisfied.

As well as having a good personal relationship with your client, this involves establishing the scope of your project and having clearly defined outcomes that you’re working towards. This reduces the risk of clients challenging your agency’s invoices, which will hold up the payment process.

2) Set Clearly Defined Payment Terms from the Start

When you start working with a new client, it’s important that you agree upon, and define in writing your payment terms. You need to specifically address payment terms (how soon after you send an invoice is payment due?) and what will happen if payment is overdue.

3) Use Leverage to Encourage Prompt Payment

You might think this would damage your client relationship, but it’s a common practice for agencies. Your contract should state that full payment is required before you pass over your completed work to your client – whether that’s their final design files, or you’re deploying the code you’ve written for them. This incentivises them to pay your agency promptly, so they can start benefiting from the work you’ve done for them.

4) Have Different Ways for Clients to Pay You

You want to make it as easy as possible for your clients to pay your invoices. If you just accept payment by cheque then you’ll be waiting a while for your money – cheques have to be mailed to you, then you have to go to the bank and pay it in, and then it takes a few days to clear. And what if your clients don’t use cheques?

Accepting payment digitally, via bank transfer and credit card (using a service such as Stripe) will greatly expand your client’s payment options, and enable them to pay you in the way that best suits them and their accounting set-up.

Learn more about improving your digital agency’s profitability. Download our eGuide, below.

how to make your digital agency profitable

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