How To Tell Clients They Need to Pay in Advance for Annual Accounts

Why do clients need to pay you in advance for annual accounts?

I have talked in the past about how you should ensure that your payment terms enable you to get paid in advance before you start the work.  It helps your cash flow and better allows your clients to budget.

Many of the firms that I work with are starting to adopt this monthly in advance payment approach for annual work such as financial statements or tax returns.

You can watch the video here.

How it works

It sounds a little confusing, but it’s actually quite simple.

For example, if a client has a year-end of 31 December, then they would start paying from the previous 1 January in 12 instalments, or in 12 instalments up to the date it’s expected the accounts will be completed.

If the firm is aiming to complete accounts within three months, that 31 December year-end would be done the following 31 March and the payments would start 12 months before March 31.

How to explain it to clients?

People tell me they love the idea but wonder about how to move clients onto the system. “Won’t there be a point in time when there’s a double charge – a catch-up?” they ask.  They’re right.

So you have to explain that properly.

When you are sat down with them it’s most likely their previous accountant allowed them to pay in arrears.

So instead you say: “We have easy payment solutions to improve your cash flow and help you with budgeting and forecasting because our accounting packages are paid monthly in advance by automated payment.”

Because they have just hired you to do the accounts it’s likely that they have accounts due to be done now.  So then you say: “If you have a set of accounts to be done now then we have a range of easy payment options to help with any catch-up.”  

You then list the options – paying by credit card, finance, by cheque or spread the cost over the first few months by recurring payment. At this point, our language has been clever. We’ve used it to focus on the benefit to the customer, not ourselves. We’ve talked about helping them with cash flow, allowing them to spread payments and forecast and having a range of easy payment options for the catch-up.

Two payments in one

Many firms I work with then tell their clients: “That means you have to pay for this year’s accounts that are now due and start paying for next year’s.” However, they go on to say: “We don’t want to give you any unexpected surprises or cash flow problems so you can pay for this set of accounts by 12 interest-free installments.”

That sounds generous.

But effectively what they are doing is paying 12 instalments in arrears for what needs doing now, and in parallel 12 instalments in advance for next year’s accounts.

They are paying two lots in one.

The winning statement

Many firms top it off with one extra statement – which again their clients love.  They say: “The good news is at the end of the 12 months your recurring payments to us will roughly halve.”

That’s how to move from the old way – being paid in arrears – to the new way of getting clients to pay in advance by up to 12 months.

And that makes a huge difference to your cash flow.

If you found this valuable and would like to learn more about value pricing, I run a free live online training session every month with a topic chosen by you. Attend live and you can ask me any questions you have. Click here to register and I will send you an invitation to the next session.

Wishing you every success on your pricing journey

Mark Wickersham

Chartered Accountant, Public Speaker and Author of Amazon No.1 Best Seller “Effective Pricing for Accountants”