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Re: Who's on first?

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Al Bergstein
Re: Who's on first?
on Aug 2, 2011 at 2:56:42 pm

Perhaps you should talk to your banker. See if you can get AR financing for Client A's projects, go to Client A and explain that you have to do that because of their payment slowness, and that you need to get POs from them for your banker, and will need to charge them the interest on the money you are borrowing based on their tardy pay schedule. You can't be expected to float their business payment schedule, because you have payroll to pay too, supplies to buy.

This problem is endemic in the world of advertising agencies, and by working with a business banker, you will gain valuable cred, especially to help you grow your business. However, in this economy, it may be hard to find a business banker to help you, though it seems to me, given my experience that US Bank and Bank of America (a bank I would not personally use) are two that specialize in business banking, which often includes AR financing. How tight the market for this kind of thing is, is anyone's guess.

I personally ask for money up front (1/3rd in front and more depending on the trust of the client). Also, you might talk to your client about a retainer. If they are a monthly regular, tell them you need $x on a regular basis, you will credit them with so many hours, and account for the hours used every month. One of my clients is done that way, and they don't even ask for an accounting anymore for hours used. I track them anyway. Maybe explore an escrow account, where they would deposit a large chunk of the costs in advance, they would control it, and you draw down what you need, when you need it. If the job is ongoing for $10k a month, for example, they deposit the whole amount in the escrow account and draw as needed. On delivery, use get the final, remaining amount. Talk to their bookkeeper about methods that person would be willing to back with management, then talk to management about it.

Alf


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