Great Ideas for your Small Business: Ask for a Deposit
For many entrepreneurs, making a sale is easy. The tough part is getting paid. But without steady cash flow, even the strongest business will starve.
In 2000, small businesses buffeted by the recession began asking customers for deposits before they started the work or filled an order. Asking for a deposit is a great way to boost your cash flow. If handled fairly and properly, it won’t alienate good customers.
Professional consultants often require 50 percent of the first month’s fee when they are retained. Payments are made along the way, and the balance is due when the project or report is completed.
If you haven’t required deposits before, draft a short letter of explanation and send it out to all your customers or clients. Make sure you are clear about your new policy and don’t play favorites. If you begin asking for deposits, you have to make sure every customer or client is required to comply with the policy.
You don’t have to be a painter or carpenter to ask for a deposit. Your customers shouldn’t object to paying 20, 30, or even 50 percent down when they place an order or sign a contract. So ask for a deposit to secure your products, time, and services. It makes good business sense.