Wednesday, October 28, 2015

Terms are a Deal Maker or Deal Breaker


When it comes to cash flow, payments and terms are either a deal maker or a deal breaker.

Some industries get this.  One of my kids is in the process of closing on their first house. Paying $700 a month until 2045 sounds almost like forever, but asking them to coin out in full for the new place would have never made the purchase possible.

Some business owners I know are abhorrent of terms. One solopreneur constantly rants at me “If they don’t have the money, they don’t have the need.” I respectfully disagree with their rant, and I also have learned to keep my mouth closed around them. Experience has taught me businesses and families all have budgets and cash flow concerns. It's up to you as a vendor or supplier what you will do about this.

Terms as a Closing Tool

I believe in terms as a closing tool.  It is not necessarily fly now/pay later as that critic likes to portray this, but it works with the budget scenarios for numerous small to medium businesses.   Cash flow may always be king, but the ability to have it flow towards you is how you judge your sales and marketing success. 

Here are some cash flow and payment strategies with which I have had success:  
  • Accept Credit/Debit Cards - The lack of ready cash in people's wallet or purse should make this option quite obvious. I have an app for Intuit QuickBooks Payments on my cell phone.  This allows me to inexpensively accept credit and debit cards with no monthly maintenance fees and significantly lower redemption rates. Other popular services include Square, PayPal and CASH. I find that Intuit pays faster than the others.  If your volume dictates, work with a reputable credit card processor who can help you manage your transaction loads. They are tasked to find you the best processing rates. Gone are the days when your commercial banker made 8% or more on the redemption of a credit card transaction, plus sky-high monthly service and merchant fees. 
  • Auto Pay – If someone I know retains me for a project and needs to space out equal payments of a set amount for a sustained period, I tell them the only way for this is equal payments via debit or credit card or  Electronic Fund Transfers set to pull before the 28th of the preceding month. (I explain that every month as a 28th.)  I have also accepted recurring check payments set up with proof of this submitted to me. 
  • Offer A Discount for Cash -  I learned this tip from a commercial contractor I know. He takes every one of his bids and multiplies his final cost by 1.2. When presenting his proposals, he will then offer customers a 15% to 20% discount for cash if received in full at the start of the job. Therefore, he has protected his margins and still has negotiating room should the client be looking for a discount. 
  • Sell The Payment – If your clients are constantly looking for you to offer payment options, but the idea of juggling all these has you concerned, sell the servicing of your debt off to a third party firm.  Finance companies, commercial leasing brokers, and consumer leasing companies are available to buy this debt from you, pay you at close and will then serve as the intermediary. I worked for a commercial leasing broker for three years and was able to help many companies close deals which they might  not have received otherwise.  One key: you need to disclose fully your customers that these payments are serviced by a third party company. 
One non-negotiable rule of all sales and marketing: There should never be any guesswork on either side on how the buyer is paying the seller. Both sides should totally agree at the time of signatures on an order.

Let me know what other option you offer to take the sting out of purchasing your products or services. 

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