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Payment in Full? Deposit? Credit?

Discussion in 'General Business Forum:' started by Stationery Direct, Aug 6, 2009.

  1. Stationery Direct

    Stationery Direct Administrator Staff Member

    Following on from this thread that went a little off track (take a read)....

    I am just wondering how everybody conducts their own design business. Do you ask for payment in full prior to starting a job? A deposit? Or do you offer the customer the option to pay in full on completion?

    As mentioned in the thread above, my personal opinion is that I would rather not have the job if a 50% deposit cannot be agreed, giving the customer the upper hand by giving them credit is a very risky way of doing business...especially for a new company just starting out.

    Is credit something that you feel you have to offer in order to win jobs and to compete with the more established companies?

    Lets face it, Tescos, Currys and the like won't give you a product without receiving payment in full, why should the design industry be any different?

    Thoughts and opinions please :icon_smile:
  2. JMCDesigner

    JMCDesigner Member

    Good thread. I think I agree with your statement that it depends on the business you're dealing with too. If your on v friendly terms a deposit can be overlooked. But for a one man band freelancer finding new work, a deposit (and written contract) off another one man band business is essential. Having neither is madness. I think most sensible Businesses would not mind putting up a percentage deposit. You could argue a deposit is a kind of contract. And you could argue the deposit is for set up costs, buying domain name, setting up emails and hosting space etc
  3. CYoung

    CYoung Member

    I used to ask for 25% deposit. Realised for smaller jobs this often leaves me uneasy, so 50% covers my time if the client takes a while to cough up the rest.:icon_wink:
  4. Hi

    We ask for upfront payment. Works for us. We lose a few jobs because of this but then from previous experience, anyone who has a problem with this is usually the client who has a problem paying anything! :icon_wink:

  5. Stationery Direct

    Stationery Direct Administrator Staff Member

    Exactly, this only becomes apparent with experience.
  6. printingdeals

    printingdeals Member

    Full payment upfront for any printing customers, unless we have credit agreement with them.

    50% at least for web and graphic design work. Even then in some cases we have trouble recovering remaining invoices.
  7. Arhiann

    Arhiann Member

    In general though would you expect to pay for something on the promise of delivery? I have had a bloody nose from this in the past, and I certainly wouldn't. To be fair we have a verifiable (and good) credit/trading history, and I may consider sharing the risk if the supplier has a similar standing but in the main I don't need to as we're an insurable risk. If you had made a payment to Woolworths in expectation of supply the day before they went into administration would this now change your opinion of paying prior to delivery?

    Lets not confuse the issue between B2C and B2B though, as risk is easy to avoid in B2C (section 75 of the Consumer Credit Act gives quite reasonable source for recourse for non supply). Of course it's not so easy in B2B; this is what guarantees and contracts (and I concede sometimes prepayment) are for.

    In the instances that you describe though involving small companies, one man bands etc where a deposit would be required to cover your Xs it's unlikely that you will be a good risk, and that the customer could well be a better risk than you already are. It's not expensive to set yourself up as a web designer and therein (to my mind) lies half the difficulty. Would I pay you £1000 on the promise of job, when there is a real possibility that you are one bad debt from bankruptcy (in which case I'm an unsecured creditor). Quite often small companies/one man operations don't have the kind of capital investment that can provide confidence in your ability to provide or refund.

    Different circumstances required different measures, but it is rare that we ask for prepayment or even a deposit. I agree that it is a risk, but that is the nature of business. Asking for a deposit at all times is likely to lead to you losing some of the bigger contracts that someone on the other thread mentioned they would like to find.

    To sum up; to each their own. In business though, there is pretty much an expectation of credit whether you like it or not. I know plenty of designers (several times more than I have seen on here) that don't expect a deposit unless there is a history (or lack of) that would suggest that one is required. To be frank though in circumstances where history is less than ideal (which could just be that you've not traded for very long), it's almost certain that full payment would be required prior to doing anything.

    Even my accountant (and they are risk averse by their nature) starts taking payments six months after they've started providing a service. I think to have a deposit as a prerequisite can harm your business far more than the odd bad debt.

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