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Value Added Ep.14 – What Day to Renew Clients

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12 Aug 2020

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This week’s episode is all about getting paid.

Not so much how to get paid, but when.

Jonathan and Jarod have different approaches to billing clients, and it impacts their operations more than you might think.

No matter when a client starts service, Jarod bills them on the first of each month.

Jonathan bills them monthly from their start date. So, if a client starts on the 18th, they’re charged on the 18th of each month going forward.

According to them, each approach has its advantages and disadvantages:

Billing on the start date

Pros: 

  • You have revenue coming in throughout the month, which can help smooth out cash flow issues.
  • Labor is spread more evenly over the course of the month.
  • Clients don’t require or expect deliverables like reports all at the same time.
  • If you lose several clients over the course of a month, the impact on your revenue is staggered. This can give you additional time to find and onboard new clients to replace the ones you lost.

Cons:

  • Accounts receivable and billing are potentially more complex.
  • Revenue-based forecasting is less predictable.
  • Having deliverables for each client due on different dates makes project management more challenging. It’s easier to miss a deadline.

Billing on the first of the month

Pros:

  • Managing cash flow and budgeting is greatly simplified, because all of your accounts receivable are paid more or less at once.
  • You’re in sync with the majority of businesses who also operate on a monthly schedule. For example, they pay their bills, go over their reports, and measure performance at the beginning of each calendar month.
  • If much of your client reporting is automated, it can simplify that process to take care of it all at once.
  • Having all your clients on the same schedule can facilitate working with freelancers and outside vendors.
  • As the agency owner, it makes managing your own time more predictable. For example, Jarod schedules all his podcast appearances for the last two weeks of the month.

Cons:

  • Much of your labor — for example, reporting and account management— is concentrated in the first week of the month. Not only can this be stressful, it potentially leaves you vulnerable if a crisis arises.
  • Clients whose services start mid-month require their first invoices prorated.

Subscribe to the Value Added Podcast — featuring SEOButler founder Jonathan Kiekbusch and Blue Dog Media head honcho Jarod Spiewak — to be notified about future Live Streams and Podcasts.

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