“We are a small marketing company, and we find more and more of our vendors are requiring payment in advance of services, whether for printing, ad placement or sign manufacturing. Under our current billing procedure, it typically takes 30 days before we receive a deposit payment from our clients… which means that we are using our company credit card to pay for services before receiving payment. We are looking at ways to speed up client payment, and are considering accepting credit cards. Are any other agencies doing this? If you do, what successes or failures have you experienced? Also, does anyone use PayPal as a payment option?”
So asked a Second Wind member in our online Forums. Many companies have adopted credit card payment to stretch their cash flow and manage expenditures. For your clients (and for your agency, if you use credit cards to pay vendors), credit cards enable monthly tracking of business expenses, a way to offer employees a line of credit for business-related expenditures, and a way to obtain an “interest-free loan” (assuming the credit card holder pays off the balance each month).
The Pros of Client Credit Card Payment
Many companies prefer to strictly limit credit card use to purchasing new equipment or supplies, or for employees’ deductible travel expenses. But in the current economy, the credit barriers have come down, and more companies are using credit cards to pay partners and vendors. The biggest beneficiary of this trend has to be the credit card companies, who gain substantial transaction fees for processing the charges.
While accepting credit cards may turn “maybe” prospects into “yes” clients, work the credit card service to your agency’s advantage. Shorten collection due dates to 15 days, and stand firm on that. Better yet, offer a small discount for immediate payment using a credit card. Just make sure your estimating and billing practices are tight and accurate, so you can continue to make a decent profit.
Also, companies, just like individual card holders, must manage their credit card use carefully to ensure they do not exceed spending limits, or end up paying huge interest fees on unpaid balances. If you are planning to accept credit cards for client payments, run credit checks on clients ahead of time to be sure your clients have a good credit score and can be trusted not to default. Also, try to get a partial payment at the start of a project, and insist on payment on delivery; that way you won’t end up holding the bag on costs while the client strings out payment.
SW Members Offer Credit Card Tips
A number of our members responded to the Forums query. Here are some tips from agencies that accept client credit card payments.
“We find some of our clients like to use business [credit] cards as a way to manage cash flow,” said a Michigan member. “We have turned 45-60-day collections into 2-3-day collections by accepting credit card payments. The faster cash flow more than makes up for any bank fees.”
“We only have one client who pays with a credit card and that costs us 2 percent, which we try to account for in our estimates,” said George Foster of Foster Marketing, Houston, TX. “You must also speed up your billing, either billing on estimate or billing more frequently… and, maybe find vendors that have better terms. Paying for printing before it’s printed or advertising before it has run is ridiculous. If you have to pay for advertising immediately, ask for a 2 percent/ten-day discount on the space.” George also noted that his agency uses credit cards to pay vendors—and racks up 200,000 air miles a month to help defray agency travel expenses.
“We certainly do accept credit cards, but more important, we make sure we receive some sort of advance deposit/payment for large projects when the client signs the project agreement, whether it be a 20 percent deposit or 1/3 of project deposit depending on the overall scope,” said Stephen McCulloch of CAI Communications, Raleigh, NC. “By the time we need to pay the printer or sign fabricator, we have enough cash to pay any type of deposit if required. But we also have term agreements with those vendors so that we don’t always need to pay deposits.”
Changing economic conditions generate new tactics. Madelyne Kirch of Sun and Moon Marketing, New York, NY, shared her agency’s strategy.
“You should have sufficient credit with your printers and the media not to have to pay before anything is delivered. If a printer requires a printing deposit, and you can’t or don’t want to front the money, tell the client that the file can’t be sent to a printer absent receipt of a deposit,” said Kirch. “On ads, we never pay media up front or without a tear sheet. We need to confirm that the ad ran when and as directed and require proof of that before we pay. One approach we’ve recently taken to speed up payment is to offer clients the opportunity to wire money into our account. Many seem to like this option, so much so, that we add the following line to our invoice: “Please let us know if you would prefer wire payment.”
Credit Processing Providers
A few members also recommended services for online credit card processing.
- EVO Payments International (formerly Power Pay). A reasonably priced service that is easy to set up. “We’ve used it with clients large and small. Also, due to the economy, we have been billing on a weekly basis and invoicing clients for direct costs in advance,” said a member from Portland, ME.
- PayPal for business. Setting up a PayPal account is simple, fees are clearly explained, and you can often draw funds to the agency account in as little as one business day.
Check these review sites for ratings of “best” credit card processing services:
Top Ten Reviews – Credit Card Processing for Business
Starr Reviews – Credit Card Processing
Business News Daily – Best Credit Card Processors 2017
Ultimately, clients will pay when they can. But offering credit card payment is a useful tactic you may want to investigate. Look for the best deal you can get from a credit processing firm, set up an account, and then notify clients of this new service. They’re looking for ways to stretch their own cash flow, and will likely welcome this new option.
See also: More on Credit Card Payments