4 ways a contract helps you sleep: Part 1 – Cash flow
You are waking up at night due to your business and problems going round and round in your head. You’ve tried counting sheep, writing a list, but nothing seems to work. So how do you get your cash flow in order and how can a contract help you achieve that?
Let’s look at Why you need a contract
- A contract is fundamental to you and your customer knowing exactly what is going to happen
- It outlines to your customer what they’re getting for their money,
- It tells them what you’re giving them for their money,
- It defines when they will get product or service,
- It sets out how and when you expect to be paid and
- What will happen if they don’t pay
It defines who the people are that are bound by this contract
What can happen if you don’t have a contract
- You are leaving yourself open to interpretation.
- Interpretation leads to disputes, misunderstandings, confusion.
- Your customer doesn’t know what you need from them & when by
Here’s a little story:
I was approached by someone on Facebook who had been waiting 18 months to be able to invoice a client. The reason for this was their contract gave their customer 100% control over when that invoice could be raised. Their contract provided no deadline for the customer to provide the copy. Until the copy has been received they couldn’t finish the project and raise the final invoice for 50% of the total project. This had a massive impact on their cash flow and also the future of their company.
So where can you go to get a contract?
- Online if you want to risk DIY
So how can a contract help with your Cash flow and therefore help you sleep better?
Putting a correctly worded contract in place means you control your charging structure, your payment structure and how much you get paid up front. It allows you to define your charging structure, your payment structure and therefore your cash flow.
Defined charging structure
- When do you expect to be paid?
- How much do you expect to be paid?
- What is that payment for?
- How much of it will be upfront payment.
- If you don’t like the idea of a deposit, or calling it payment up front, why not use the term “Time reservation fee”. I have yet to find a business that can’t get all or some of the money up front.
Defined payment structure
- Everyone knows when they have to pay
- How they have to pay
- What they are getting in return for that payment
- What the consequences of late payment are
- This helps you
- To stop being your customer’s bank
- Get money for your time before you spend it
- Build the trust relationship
“I’m thankful that it’s in place and all monies have been paid upfront
so there will be no wasting time/energy chasing payment, also it stops the money side interfering with the coaching relationship – now the coachee and myself can concentrate on their goals – this is of enormous value”
Here is the difference before working with Rachael It would have taken me 9 months, 7 invoices, anything up to 7 hours to collect £150 per invoice.
Rachael wrote a new contract for me which means I received £1000 up front, free up time for me to do more value-adding activities – business development, repay an outstanding director loan so I could buy secondary school uniforms, school shoes, PE kits including trainers, football boots etc needed for my 2 children for September.”
CONTRACTS HAVE A MASSIVE IMPACT ON CASHFLOW
So if you want to be in control of your cash flow, sleep better at night and take charge of when you can invoice, re-read your contract. Does it give you or your customer control over your ?