Of course as business owners and accountants, we always know that we should prepare for a rainy day. But let's be honest, how often do you push this thought to the back of your mind? Take the 2008-09 recession and the current Covid-19 pandemic as primary examples; many business owners were and still are being hurt by these recessions. (And many more will be as the COVID-19 recession really starts to bite.) So how can you do things differently? What steps can you take to prepare your business to weather this storm, and future storms, so that you can emerge from them even stronger? These are the two most common questions that we are being faced with lately, hence the reason for this article series. This article series is based upon a webinar we did with GI on how to recession-proof your practice. Click here to download the whole recording. To help you survive a recession, here is part three of a four-part series on how to recession-proof your practice.
Step 3: You need to make it easy for clients to pay
Yes, we are all in a recession. Our businesses have all been hit in different ways and we're looking to cut some costs and identify what's really important. This is true for many of us, but what is also true is that business is still going and clients are still willing to pay (you just have to make it easy for them).
So what does this mean? Rather than saying, "I will provide you with this service and it costs £500" - which many would hesitate to spend outright at the moment - you should say instead, "my service costs £500, but you can pay this in £100 instalments."
Although the amount is the same, you are making it easy for the client to justify this payment and you are allowing them to better control their cash flow at a time where they need it most.
Yes, we are all in a recession, but you need your clients and your clients need you. To survive a recession, you need to be flexible and allow your clients to pay little and often. If you haven't already moved your clients onto payments via direct debit in instalments throughout the year, the time is now to do this.
How to get clients to pay (even if they say they have no money)
Part 3 of how to recession-proof your practice is all about making it easier for your clients to pay you. Even if they insist that they have no money, if you make a strong case for your services and make it easy for them to pay, the money will come; money which is, you guessed it, essential to survive a recession.
So how do you do it? How do you get your clients to pay you when they are also trying to survive during a recession?
1. Be flexible with the services you offer
The best way to add value to your clients when they need it most (and to get them to want to pay!) is to swop some of the services that they don't need right now to ones that they do.
For example, you can swop management accounts to cashflow forecasting or a regular check-in call to support and advise them on any issues/challenges they are having. You can switch to a 'share of savings' or success fee payment terms for things like tax planning or helping them access their finance.
Be creative here and ask your clients how you can best serve them during this time. They may have certain pain points or problems that you can directly help with and that will increase the value that you can deliver massively,
Just think: how can I increase the value that I bring to my clients? What can I do now and how can I support them when they need me the most so that they won't be able to forget me later?
2. Explain "Why" they need your services
This may sound like an odd piece of advice on how to survive a recession, but it's very important. All of us are up in the air, we've gone through different stages of fear, anger, and in different ways, grief. This has caused many of us to make decisions emotionally. As you can imagine, that's not ideal for business, so this is why it is so essential to sit down with each of your clients to help them see why they need you.
When you sit down or have a call with your clients to find out how you can better serve them (i.e. what services can you exchange to things that they actually want/need), make sure you really hone in on why these services are essential to their survival right now. If you can help them see the impact of not having this service - particularly the adverse financial impact of doing nothing or DIYing it - the more willing they will be to have it and to keep paying for it.
Your goal here is to support your client; to help them take a step back and start making decisions rationally rather than emotionally. If you can help them see the difference between reacting to the situation and thinking it through and acting on it instead, they will understand how the decisions they are making now will have certain implications and consequences later. What this does is that it helps them see the value that you are bringing to their business both now and in the future.
3. Be flexible with your payment plans
Just like with your services, it's also important to be flexible with your payment plans too. Think about it. You need money to survive a recession so, just like other businesses who have recently increased the amount that people can pay via contactless, you need to start thinking of ways you can make it easier for your clients to pay.
For example, there are two ways that you can make it easier for your clients to pay:
- Give them a payment holiday on their normal monthly payment (but catch up payments later when they can trade again), and/or;
- Move them onto fixed fees which are paid monthly via direct debit.
Getting your clients to pay via direct debit should be your ultimate goal anyway in the long-run, so you may as well try to achieve this now. It makes it easier for clients to control their cash flow if you have a fixed amount coming out at the same time every month so you shouldn't get too much push back on this.
4. Increase your resilience to bad debts
If you want to survive a recession, you need to get your clients to pay and that includes increasing your resilience to bad debts. This can be hard for a lot of accountants, but in the current climate, it has never been so necessary.
To start getting back what you are owed quicker, here are a few things that you need to be doing:
- Start a dialogue quicker with any client who doesn't pay on time (and put in place payment plans for these clients),
- Stop work quickly on any client racking up unpaid debts,
- Ask for payment in advance for any ad hoc work (or at least, part payment).
If you start doing these 3 things immediately, you'll find that you have a much better handle on your finances and how they look month to month.
You need your clients and your clients need you
To survive a recession, you can't forget that you need your clients just as much as they need you. Not only can you not forget this, but you need to show your clients this too. Explain to them how valuable your services are and be flexible to tailor both your services and your payment plans to what they need and what works best for them. Even if you just do this, you'll be sure to survive during a recession no problem at all.
Don't forget the other parts of our blog series ‘how to recession-proof your practice.’ Parts one and two outline the importance of getting clarity and increasing your marketing, while part 3 focuses on how to cut your overheads and increase the efficiency of your practice.
Get your practice ready to thrive in a recession
Download the recording of 'How to recession proof your practice' and you will discover:
- The top 3 areas to investigate to find the quick wins to cut your firm’s cost base
- How to reduce your practice overheads without having to make anyone redundant or reduce their hours
- How to get 4-8 decent leads every month without having to spend a fortune on marketing OR spend all your time on marketing - even if marketing and sales is your weakness
- Ways to make the time to recession proof your practice even if you are overwhelmed with client work right now
- How to get clients to pay for the services they need even if they plead they have no money