re the days of net 15, 30, 45, 60 and even 90 payments numbered? How about the days of 50% upfront payment and 50% payment after you deliver the imprinted goods? Lots of decorators seem to think so, and many of them have already switched to requiring upfront payments in full, before they even start on a customer’s order.
“Thanks to Amazon and other online retailers, today’s consumer is accustomed to paying in full at the point of purchase for goods.”
- JP Hunt, co-founder and president of InkSoft
“We’ve heard from hundreds of print businesses who made this transformation and reported no resistance from customers. The resistance to updating payment policies to 100% payment in advance is essentially a bias the print shop owner has, not your end-customer, ” Hunt says.
Carolyn Cagle, owner of Strikke Knits Embroidery, decided to make the switch to upfront payments so she can free up cash flow to pay off debt, upgrade her equipment and continue to improve her services requiring materials she doesn’t stock.
“Our customers hit the ‘buy’ button a million times now with paid-in-full, plus tips, orders for products, food delivery and other services, so our shops should be no different.”
- Carolyn Cagle, owner of Strikke Knits Embroidery
“As a shop owner, I need to pay upfront for the blanks and supplies to complete the job. When my customers pay 100% in full, that 100% ensures we’ll complete their job by their in-hand date,” she says.
In fact, an upfront payment can actually build trust between you and your customer. Shop owners who’ve made the switch report feeling less stressed, less combative with non-paying customers, less worried about producing goods that may not get paid for, and less concerned about their cash flow going into the red.
If your shop isn’t quite there yet, that’s OK. Let’s take a look at how you can start thinking about making the profitable switch to requiring upfront payments in full—along with some of the advantages you’ll enjoy.
Becoming More Profitable
La Tonna Roberson, owner of T-Shirt Shop Dallas and Lady Print Boss Consulting, has taken 100% upfront payments from her customers since day one. “When you’re printing custom goods, your shop can lose upward of 50% profit from customers who don't pay invoices on time,” she says. “When you receive upfront payments, you have more working capital to get things done and then grow more quickly.”
Here are four points to help you rationalize the transition to getting paid upfront:
- Printed goods are custom and aren’t ordinary consumer goods. Most projects come with expenses like artwork setup, blanks, supplies and labor.
- Healthy cash flow practices require that you don’t finance customers’ orders. Plus, as you manage your cash flow better, especially for larger or longer-term projects, you don’t need to worry about late payments or not getting paid at all.
- Customers aren’t resistant. They understand why you’re asking for upfront payment.
- The switch to 100% pre-payment reduces your financial risk and exposure.
To shop owners concerned about implementing this new payment policy, remember it’s about education and building trust with the very people who’ll be paying you when they place their order. “Be transparent with your customer and let them know why this is your policy,” says Kristine Shreve, director of marketing and outreach at Applique Getaway. “Make sure customers understand exactly what to expect and how the payment process works. Then, keep in close communication with them, while the project is in process. If you make your customer feel secure that they'll get what they're paying for on-time, you're more likely to get that upfront payment you want.”
Studies show that when we make a decision—like ordering 5,000 screen printed T-shirts from a decorator—our brains look for ways to validate that our decision was a good one. “One of the best reasons to get 100% payment upfront is actually human psychology,” Shreve says.
“When your client pays you 100% before you start the job they’re mentally buying in, essentially putting all their chips on you and your work. They also don't want to have made a bad decision, so they're motivated and oriented toward liking the work that you've done.”
- Kristine Shreve, director of marketing and outreach at Applique Getaway
Overcome the ‘Fear of Losing Customers’ Mindset
Let’s restate this: When customers pay you 100% in full upfront, you’re 100% safeguarding your business bank account and cash flow. “When you accept partial payments, you add a level of stress that isn’t necessary to your life,” Shreve says. “Chasing payments and worrying about cash flow are tasks that too many decorators are all too familiar with in their daily work."
"Switching to a 100% upfront payment policy eliminates worry about a client who hasn’t paid, and also allows you, as a print shop owner, to know exactly what their cash flow is at any given moment.”
- Kristine Shreve, director of marketing and outreach at Applique Getaway
So, if you’re hesitant to make the change, the first question is: What’s holding you back? The second question is: What happens if you decide to convert your print shop to 100% upfront payments? The reality is, if you run an ethical business and deliver high-quality work on time to your customers, you should have zero hesitation about asking your customer to pay in full before you order blanks, digitize a logo or imprint one garment.
You’re in business to be profitable, with a robust cash flow, not to be stressed out about collecting thousands of dollars on goods you’ve already imprinted and delivered to customers. Plus, most customers will gladly adhere to your new payment structure if you’re turning out quality decoration work on time as the norm.
“Decorating businesses that don’t require full payment are only slowing their growth,” Roberson says. “Upfront payments should be the industry standard. Any partial payments should be a privilege that’s only extended under certain circumstances to loyal customers. No order should ever go out your doors unpaid.
Consider what we said earlier, customers who balk at paying 100% upfront are ensuring they have an out with you. Whether they want to be able to cut and run if they don’t “like” the final product or they plan to delay their final payments to you for months and months, that’s probably not an ideal customer for you anyway.
Think About How 100% Upfront Payment Will Work
Roberson advises that one easy way for shops to implement this new payment structure is to put it in their contract or ordering terms and then send out invoices immediately for payments. If your customer is ordering from you online, however, your system can require 100% upfront payment for them to place the order.
“We also send out an email to customers that their order has been placed pending payment. Our shop prints on a first-pay, first-print basis. This email gets customers to pay immediately.”
- La Tonna Roberson, owner of T-Shirt Shop Dallas and Lady Print Boss Consulting
Consider the alternative: You’re in the middle of decorating 5,000 T-shirts, and you need to keep sending invoices in phases. Let’s say your customer doesn’t pay. Now, you’re annoyed and stressed. You or your staff keeps sending “friendly reminder” emails, while continuing to print out their shirts. When clients pay upfront, however, they “buy into” your shop and services, and you in turn, give your best effort and value, since you’re already paid for the work.
Some shops that make the switch to upfront payments build in some flexibility for their customers. For example, they allow customers to make online payments with a credit card, PayPal or Zelle, and they also accept checks. You can also give your customers time to make their upfront payment, but that also means that their in-hand date might move the longer they take to make that payment.
Finally, Hunt points out that deposits and terms are an old school convention. “There are a few exceptions, and you have the flexibility to extend deposit and term payments from certain customers where this practice is commonplace, like major government or corporate accounts,” he says.
So, if you’re a shop owner who’s thinking, “I can’t require 100% upfront payment across the board, because there are exceptions,” change your tune and make exceptions in special cases. For those accounts, set hard milestone deadlines for payment, and include in your contract that if “payment isn’t received within X days of the invoice,” the project’s on pause and may experience schedule changes due to a late payment. Many business owners view late payment as the client either dishonoring or breaking the contract, or simply not making a payment to you a priority. Either way, if you’re wishy-washy about payment terms, and continue imprinting and delivering garments without the funds, that reflects on you as a business owner.
Get Ready to Tell Your Customers About the Change
Unless you’re a startup shop announcing your new 100% payment upfront policy, you’ll be in a transition phase with existing customers. However, with new buyers, you can begin sharing your payment policy immediately.
“Plan to send emails to your current clients that a new payment policy will take effect in a certain amount of time, such as 30 days,” Roberson says. “Be honest and explain why. This explanation could be as simple as, ‘This new policy will help us stock more great merchandise or upgrade our decorating equipment to provide higher-quality prints.’ When you explain how your business growth will affect customers in a positive manner, most people will understand.”
Shreve recommends posting your new policy on your website, blog and social media accounts. “Remember also that a large portion of your customers are also business owners, so they’ll understand the reasoning for your new policy,” she says.
“As with everything, communication is key. If customers understand why you want payment upfront and feel secure in the safeguards you’ve got in place to make sure they get the work they were promised, they're more likely to agree to your terms."
- La Tonna Roberson, owner of T-Shirt Shop Dallas and Lady Print Boss Consulting
If you’re very concerned about implementing a blanket 100% upfront policy, start by asking for a larger percentage of the total amount as a deposit. “If your normal deposit is 25% or 50% of the total, try asking for 75%,” Shreve says.
Your Print Shop 2.0
Since most of us are used to paying upfront before Amazon ships out a new toaster or our local pizza place delivers our pizza, you can expect your print shop customers to easily adapt to this switch. Part of earning that upfront payment is creating a professional image on your website and social media (with lots of positive customer reviews!). If you aim to portray your business as the best possible print shop partner, your customers will be lining up, and more than happy to pay in advance for your custom imprinted merchandise.