I have just secured my first Ltd company client (Yay!)
We have discussed and agreed the fee and I am in the process of setting out my engagement letter. The fee is small, the company is in it's first year and I anticipate there being very little in the way of transactions.
The client has asked how and when I would like payment. My first instinct was when the accounts are complete, however that is a year away and I have expressed that I will be available for advice and will register the company for CT. It therefore seems a long way off from securing the client to receiving payment.
So I am just interested as to how other people deal with this. I have considered monthly payments, but as I said this isn't a huge fee.
Any opinions welcome.
Replies (11)
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Monthly direct debit
It's a no brainer. You offer this client unlimited email and telephone support during the year, don't you? So you will be working on their affairs probably every month, especially as it's a new company.
Start as you mean to go on and charge them monthly. Not only does it ease your own cash flow (as well as theirs) but it means that, should they leave you for some reason or the business does not work out, you will at least have been paid for work done up to that point.
Yes, all clients
ALL my clients are on direct debit. The only time they pay on an invoice is when the work is for a year already passed. And even then, they must settle the invoice prior to me filing the Tax Return.
Direct Debit
We also do direct debit. Very small clients we allow to pay annually such as individuals with rental income etc but encourage monthly payments. Everyone else is on a monthly direct debit. It works well for cash flow for both us and them and means we spend less time chasing payment.
We give clients a choice
Monthly direct debit, with final payment to be received before submission of tax return, or 50% up front with the balance payable before submission. The latter is the most popular choice for clients with smaller fees.
Having some fees up front means we can provide (up to 12 months) support without fear of not being paid.
Monthly S/O
I also receive payment monthly by standing order from each client. And only invoice for additional work done. I then say this includes advice and help throughout the year too, so that if they leave, I can keep a proportion of what I have received. New clients who have not paid for the whole year, have to pay any residual amount owing before I submit any returns for them, thereafter they have always paid in full before the returns are due. Some new clients who need a lot doing at the beginning, are asked for an up front retainer (covering my time), so that if they don't pay any more and leave, I have at least covered my time without any profit, but am not really out of pocket. (This hasn't happened yet, but you never know)!
S/O or DD
I have a question about DD'./ Having always used S/O's, does it cost much to use DD's how would I go about this. As I was thinking of when taking on future clients, incorporating a 3% rise in their fee annually, which I could do if I used DD's instead of S/O's?
@Carolynne
There are many D/D service providers around now. Many on here use GoCardless.
Direct debit is also useful for those one-off additional charges, or those clients who pay on a time basis (eg. monthly bookkeeping), as the invoice can be raised and payment collected by d/d.