Notifying a client that remaining 50% payment is expected hereafter?

Cianos

Hi all,
Our invoices work on the basis of 50% of the payment being requested upfront before a project begins, and the final 50% before project sign off.

It's not uncommon for projects to either go uncompleted or remain in a long term state of limbo due to the client being slow to respond with feedback, putting associated tasks on the long finger, etc.

The problem is that we'd often do a lot more than 50% of the work on these projects and for one reason or another don't get paid the full amount.

There's a roughly midpoint milestone of the typical project where if it progresses past, we'll be doing close to 100% of the work irrespective of how engaged the client is thereafter.

I would like to be able to send a polite notification to a client that informs them as the project passes that milestone that full payment will now be expected, as we'll be carrying out close to 100% of the work (suggestions on phrasing?).

We've had clients in the past dispute final payment because a project "wasn't finished", which was because they decided to ignore our communication at the end of the project. I feel a notification on final payment such as the above would help protect us from that by the fact that they allowed the project to progress beyond the midpoint milestone aware of the conditions we set forth and reminded them of.

Would appreciate your thoughts.

Running Balance

Would you not be better to monthly bill once the first 50% has been billed??

It must kill your cash flow

Cianos

Hey thanks for the reply.

How would that work exactly?

Let's say the project is €1000. We've been paid €500 on Day 1.

Are you suggesting we bill for the other €500 on Day 30, or bill a % of that remaining €500 on Day 30?

Peatys

Our website builder looked for 75% up front, then the last 25% once all comments had been addressed.

You could tell he had been burned in the past, as the questionnaire prior to him doing anything was so detailed, the site was 99% there before a single comment from us.

Running Balance

How long does it take for a project to complete?

Do you prepare budgets before a job is taken on to see if it's worth while ?

How do you arrive at €1k fee (for example)

I assume you have charge out rates and time sheets? ? Therefore creating a wip sheet on how much time is time in pounds is spent on a job..

Then bill that amount..

Cianos

Peatys wrote: »

Our website builder looked for 75% up front, then the last 25% once all comments had been addressed.

You could tell he had been burned in the past, as the questionnaire prior to him doing anything was so detailed, the site was 99% there before a single comment from us.

Were you hesitant to pay such a large % upfront at all? Did you receive that questionnaire after the down payment was made?

Running Balance wrote: »

How long does it take for a project to complete?

Do you prepare budgets before a job is taken on to see if it's worth while ?

How do you arrive at €1k fee (for example)

I assume you have charge out rates and time sheets? ? Therefore creating a wip sheet on how much time is time in pounds is spent on a job..

Then bill that amount..

Thanks. Projects would tend to be more productised, so the scope of the project is fairly well determined beforehand. The problem is more so the client dropping off at some point throughout.

Peatys

Cianos wrote: »

Were you hesitant to pay such a large % upfront at all? Did you receive that questionnaire after the down payment was made?

No, the questionnaire was in his answer to our initial query. His email detailed what work would be done for the money, seemed like good value to us, and due to the nature of his work, he sent us 40+ links to his previous work, so we were confident.

pedroeibar1

Are you asking the right question?
Firstly, your credit terms should be clearly stated in the contract/work specification and also printed on the reverse of every invoice. Refer to them.
It’s not realistic IMO to look for a substantial payment before the work/product is actually delivered, regardless of what you have spent.
I’d view your payment terms as less than effective. If the present system is failing, it could be more effective to take 30% with order, 60% on delivery and 10% after debugging. Could you run the site on your server and have it security protected until final payment was made?

Cianos

pedroeibar1 wrote: »

Are you asking the right question?
Firstly, your credit terms should be clearly stated in the contract/work specification and also printed on the reverse of every invoice. Refer to them.

It’s not realistic IMO to look for a substantial payment before the work/product is actually delivered, regardless of what you have spent.

Thanks for the reply Pedro. We have the credit terms on the invoices alright.

We wouldn't expect the payment before final delivery, we just want to remind the client that full payment is expected before the project progresses beyond the milestone. I was hoping to have an indirect way to essentially say "okay, we're moving the project ahead and if we continue we expect payment in full." - it's more as a backup for the problematic jobs where the client disappears, rather than a measure against the better clients that remain in communication, because for them, while we would obviously still be sending the reminder as a part of the standard process, payment would still be requested once the site is completed and ready to go.

I’d view your payment terms as less than effective. If the present system is failing, it could be more effective to take 30% with order, 60% on delivery and 10% after debugging. Could you run the site on your server and have it security protected until final payment was made?

We don't publish a site before payment is made. Even so, some clients do just disappear before the project is completed. A lot of our clients are one man shows - I think some people only afterwards realise that the project takes more time than they thought they had available, I suspect some just get bored/disinterested, or, they're not happy to pay for additional work that they request along the way.

The majority of clients are an absolute pleasure, it's just the few who we end up doing almost all the work for but only receive half the payment.

For what it's worth, we're actively improving our processes and trying to simplify everything for our clients.

ironclaw

For what its worth, I adopted the same business model as the larger enterprise software providers but you need to sell slightly differently. Most users know it costs money to have a website built, few understand and even more underestimate how much it costs to maintain it. Hence I say 'I'll build you the website and I'll be on hand if you need me for as long as you want' (Obviously keep tabs on time spent) It gives the client peace of mind and copperfastens your cash flow. It also stops you doing work for free as no matter how hard you try, you're going to have to log on and make edits when the client crashes their system or just can't get a change done.

Hence, assume a build is going to be 2500EUR. I charge 500EUR per month, for 5 months. Takes the sting out of forking over a large sum in one month from the client and guarantees my cash flow for 5 months. From day one, I build in a, say, 250EUR monthly payment as maintenance for a period of 12 months from the end of the build payments e.g. Month 6 and onwards. The period has caveats of course e.g. No redesign, limits on hours etc. Most clients take this option and its constant recurring cash flow for many months, as opposed to a lump sum for one.