There’s a lot of advice out there about how to charge people for your goods or services. Do enough research and you’ll be up to your eyeballs in retainers, percent interest, late fee strategy, expensive bookkeeping programs, and suggestions for hourly rates. As a startup business, here’s a few lessons I’ve learned over the past year and what I found works for me.
Lesson 1: Check the industry standards for your craft. This will give you a good idea of what you should be charging and what people expect to pay. If you are chronically undercharging, don’t expect your clients to tell you – they’ll just pay what you’re asking and get a really, really good deal. If you are taking the plunge and starting your own business, you are worth the industry standard for what you’re doing. Have confidence in what you’re offering and keep your rates competitive.
Lesson 2: For service-based businesses, consider asking for a retainer. As much as you want to believe the best about the individuals who hire you, it’s always a possibility that they just won’t pay. This happens for a lot of reasons but after spending x amount of hours invested in them, it really really sucks when someone just doesn’t pay you. One way to prevent that is to a. always have new clients sign a contract! and b. require half the payment up front. It’s up to you how much you charge before you start, but people tend to take things more seriously when they’ve already made a monetary investment.
Lesson 3: Include in your contract what will happen if payment is late or missing – it’s okay to charge a late fee, typically a month after the invoice is sent, but make sure your contract has that well outlined so you always have something to refer back to.
Paypal has worked really well for sending invoices and keeping track of payments. I set one up with my business name and logo and have the ability to charge tax if necessary, send payment remidners, and keep my clients in an address book for quick reference. Paypal does charge a fee, however if you keep track of that for each transaction in your fancy shmancy excel accounting sheet, you’ll get that back when you do your taxes. (That amount goes under the bank charge column.)
Even if your clients send money by cash or check, you cans till mark it paid in Paypal and write the check numbers down to keep track of it. Super flexible and easy to use – that’s the name of my game here.
I’d love to hear if you’ve got some other great ideas on this topic!