Then, as the holiday season kicked in, almost all of my accounts receivable went into arrears, many by as much as three months. It was a Scrooge Christmas for the kids that year.
I learned a valuable lesson from that client, and that season. It wasn’t long before I instituted a policy of cash in advance.I learned a valuable lesson from that client, and that season. It wasn't long before I instituted a policy of cash in advance. Click To Tweet
Apparently, while this policy was a familiar one in Atlanta, it was not in Durham, at the time. But, I was able to convert all but one client to automatic drafts on their account for their monthly fee, in advance. It was the beginning of tax season by then, so I was also able to get 100% of my clients brought current.
For an accountant, carrying open accounts is just plain dumb.
If you are fretting about cash flow and chasing clients to collect past due accounts, then you may want to establish a retainer system and eliminate the problem.
- (1) Modify your engagement letter to spell out your policy of collecting an advance ‘retainer,’ along with a retainer at the time the engagement letter is signed. If you bill by the hour and your clients fees vary by the month, then set a standard for the advance retainer, and collect the overtime in the following monthly ACH.
- (2) Have all clients sign an ACH draft authorization, allowing you to draft their accounts for your monthly retainer. Be sure to include an NSF policy.
- (3) Don’t engage with prospects and clients who are not willing to pay a retainer. If they were retaining an attorney, they would understand that a retainer is required. Your services are just as valuable and only slightly less intangible than an attorneys, and many times, may help the client avoid the need for an attorney.
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