Whenever possible, aim to have customers pay before delivering a product or service.
Consider a dry cleaning business: A customer drops off clothes, you clean them, and they pay upon pickup.
This seems reasonable but is actually a poor business practice.
Suppose your business generates $100 per day, totaling $3000 per month.
When customers pay after service, you finance their use of your service without charging interest or fees. You cover costs upfront (labor, materials, utilities) without immediate compensation, tying up cash flow and increasing financial risk.
The issue arises when customers delay picking up their clothing, sometimes for weeks.
Even though you’ve “sold” $3000 worth of services, you might only collect $2000 in cash that month. This delay potentially loses 1/3 of your revenue, with the rest unrecoverable until the customer decides to pay.
Requiring payment upfront secures the full $3000 each month. If a customer delays pickup, the burden is on them—they’ve already paid.
This shift stabilizes your revenue, protecting your business from cash flow issues.
This principle applies broadly.
No matter your business type, collecting payment upfront stabilizes cash flow, reduces financial risks, and ensures timely compensation for your work.