How Client Agreements can help boost your profit

Client Agreements More Profit Service Business

BAS time. That time that rolls around four times a year and makes us have a long hard look at ourselves. For some, there’s a big reality shock there at how little we’re actually profiting after tax and all the rest of it. If you’re thinking it’s all too hard and perhaps it’s time to throw in the towel, don’t give up yet! Some simple changes to the way you do business might turn it all around. 

Read on for the keys to writing client agreements that increase your profits.


You’re charging me HOW MUCH?!

Bill shock is a killer for any fledgling business relationship. Not only are you going to have trouble getting that invoice paid, but you might even need to knock some off the top to salvage the relationship.

Be clear up front on your pricing. If you’re charging by the hour, give your clients a reasonable estimate of how many hours the work will take. If they keep changing the brief, gently remind them each time that this your fees will increase and give them another estimate.


Show me the money!

When a client first engages you, do you get stuck straight in?

If so, then stop!

It’s perfectly acceptable for small business owners to ask for a deposit up front before you start any work. Apart from helping your cash flow, it also establishes a relationship of trust between you and your client.

It can help with those clients who drag their feet to – if they’ve got skin in the game, to begin with, you get bet they’ll be responding to you a lot quicker.


Client Agreements More Profit Service Business 2

Are you charging what you’re worth?

You’re running a business, not a charity. Charge a reasonable market rate for your services.

If you’ve got a potential customer asking you to reduce your rates at the outset, be hesitant to agree. You know your value. They don’t.

Offering discounts and bundles is perfectly good business practice, but make sure you do so for marketing purposes. For example, offering a discount for prompt invoice payers on future work is a good way to encourage repeat work. Don’t offer discounts willy-nilly.


Who are you really doing business with?

Particularly for services offering largely online, it’s hard to know exactly who your customer is. At the very least, you need to be gathering enough details about your client to identify them properly.

For larger amounts, you should also consider doing a solvency check. You can get credit checks and reports which will show you if there are any warning signs indicating a client’s not good for the money. If that’s the case, it doesn’t mean you can’t do business with them, but I’d be looking at getting a money.


How often are you billing your clients?

Do you always wait until the work is complete before billing a client? How’s that working out for you?

Cash flow is a major killer of small businesses – don’t be afraid to regularly bill all of your clients. That way clients who are dragging the chain and making their matter drag out for months on end are keeping the cashola flowing to you.


What are your invoice terms?

Unless you’re in a deeply regulated environment, you can pretty much set whatever invoice terms you like. 30 days, 7 days, immediate payment required – it’s up to you.

If you do a lot of work with corporates you might find this one a bit difficult, because they often have their own accounts receivable processes and they’ll only pay invoices in line with that schedule. Annoying, but sometimes worth it for the regularity and security of payment corporates provide.

On the other hand, if you’re subcontracting to another small business, you’ll want to make your terms as tight as possible. And for goodness sake make sure you’re not being “paid when paid” i.e. you get paid when they get paid by their customer. What if they never get paid? You’re left holding the bag.

For clients where you have some concerns about their ability or willingness to pay, make sure your invoice terms are tight too so that if things do go belly-up, you haven’t gone too far into the red.


So what’s all of this got to do with client agreements?

None of these practices will mean a thing if you haven’t got it down in writing. Client agreements set clear expectations on both sides at the outset, which is the key element in a successful transaction in a service-based business.

A good client agreement can set out your terms of doing business in a way that is favourable to your cash flow.


Need Legal Help? Book a Discovery Call today

Get in touch with us for an obligation-free telephone consult.

Subscribe Now

Subscribe now and receive access to all of the latest resources that we have to offer
Rps Author Profile
Courtney Bowie


Courtney is Her Lawyer’s founder and principal lawyer. Before starting the firm in 2017, she worked as both a lawyer and consultant in top-tier law firms. Courtney is passionate about gender equality, mental health and wellbeing, especially in the legal profession.

Share This

Select your desired option below to share a direct link to this page