At our place, we always take a deposit from the customer at the point of ordering. We take 15% upon signature, with the rest paid on completion. If it is a large job, or a conservatory, we take stage payments. That’s how we work, always have and always will. There are plenty out there which offers no deposit, a variety of credit schemes etc, but that’s not how we choose to work.
There are a lot of advantages to taking deposits, but here are just a few:
Improved Cash Flow
If you’re a small business like we are at my own place of work, deposits are a very helpful boost to cash flow. A 15% deposit may not seem all that substantial, but add a few of them together over the course of a working week and they start to add up quite nicely. Especially as they sit alongside the final balances coming in from completed jobs.
A group of deposits helps pay for staff wages, or smaller bills or just quite simply tops up the bank balance. What it also does is provides back up cash if the business find that a customer has failed to pay their big final balance at the end of a contract. Knowing that deposit money is coming in is always reassuring to a business owner.
Protection
Speaking of customers not paying, this is another area where deposits and stage payments come in very handy. We all get them, those customers that find a list of excuses not to pay when the time comes to cough up. In these scenarios, it’s deposits and stage payments that help protect your business against professional non-payers.
If a customer has 80% of a balance outstanding and they’re not paying, this is far more damaging to the bank balance than an outstanding balance of say, 10% is. This way, you and your business hold more of the cards, and obviously you need to focus on the issues stopping the final balance being paid in full. But what this does is provides cover and stops and future larger problems stemming from non-payment.
Commitment
Deposits also force a customer to commit to the deal. That might sound a bit silly, but when you consider that a signature on legally binding contracts seem to carry very little weight with consumers now, getting their cash is by far the better option.
It forces them into a position where after the 7 day cooling off period expires, they are tied in to using you and and your company’s products.
These are just a few points, there are many more, but I risk rambling on. At the end of the day, deposits ensure commitment, improved cash flow and protection for the business. It doesn’t matter if you’re a one man band, a small installations company or a national business, a deposit is money in the bank, and that is always a good thing.
Agree or disagree? Are deposits just another barrier to getting the sale? Or do deposits provide security in a consumer savvy age? All comments welcome in the section below.
If you don’t take a deposit, then you are a mug. Simple as that. Maybe this industry is worst affected by customers trying to avoid full payment than others due to the reputation the industry has for being ‘crooked’ or fly. So the customers who are inclined to try to take the proverbial will feel more inclined with DG than they would, say, paying for their house to be redecorated to try to weasel out of paying even when the job has been done. A deposit at least means that some of the material costs is covered or wages paid… Read more »
Always take a deposit, it is a sign that the customer is committing to your company. Customers expect to pay a deposit so never feel bad about asking.
Our company use a deposit registration scheme which protects the customer and is another good selling point.
Martin,
Would it be possible to provide more details on the deposit registration scheme you mentioned.
Have tried looking for more info but can only find info for tenancy schemes.
Cheers
Keith
We at St Johns Window Centre have not taken deposits for many years and we are not mugs as stated above. 33 years trading and still going strong ! We send an invoice after all work completed and ask for payments as soon as possible after that. The quality of work means customers will pay quickly. I agree deposits may force a customer to commit to the deal and with new consumer act we will need money quicker but we will cross that bridge later in the year. Every company should have the right to trade as they like, as… Read more »
Londoner, I`m not a mug! I`ve only ever taken 1 deposit ( for a R9 job, which I had to pay for on order/delivery )
In 7 years . I am owed £600 from a none payer. How`s that for a mug ??
Keith, QANW do a deposit scheme. !
Our view is that it is reasonable to ask for a deposit; after all the consumer is ordering a bespoke product, but it is also important that the deposit is seen as belonging to the customer, not the company, and a deposit guarantee scheme is available for the customer if they want it. At the Federation, in our Commitment to Good Practice we explain how deposits should be treated (it is on our website). A deposit scheme is available which is very cheap, to give assurance to any of our member’s customers. We set the maximum at 50% (which may… Read more »