‘With Money, the Dog Dances.’

A common Spanish proverb, ‘with money, the dog dances’, seems symbolic of the change in behavior we are experiencing with upfront deposit requirements on projects.

Often, in the past, tradition saw 2/10, Net 30 as the standard invoice payment terms. If you paid in ten days, you received a two percent discount. And the rest of the sale was due within thirty days. Your seller did not ask for money upfront. Payment was always on terms and usually delayed, just common practice. However, we have been seeing changes in this pattern recently.

Small businesses are increasing the amount of upfront payments in the form of ‘deposits’. We are seeing amounts anywhere from as high as 50%, to as low as 5%. Some are even requiring cash, no credit cards, no checks, no payment over time. 50% upfront before the job begins and the rest as the job is completed. If you are not capable of paying for your goods or services upfront, move on, they will find someone else who will.

This change in behavior both benefits a small business owner if they are the ones requiring the deposit but could also harm them if their vendor is requiring half the project cost upfront. Ten percent seems to be a reasonable amount we see in play, particularly among professionals.

Know the worth of your transaction, negotiate for the best deal you can that benefits you but try not to be greedy. It is hard not to feel anger towards those firms requiring 50% upfront. That can be a tough hurdle for many small businesses to cross.

Be well.