Marquee hire cash collection - like with many other SME or Micro companies is critical to survival
For most marquee hire business owners, as with any other type of SME, the critical issue of cash flow is largely restricted by how ready your customers are in producing their cash, cheque book or card.
With sales agreements often being made several weeks in advance of the booking date, the matter of payment is approached with a certain element of caution from both sides.
For first time customers, there will be a concern about the potential for financial risk (lost money & value) where payments made in advance may not be met with delivery of expected service levels on the day.
For marquee hire service providers, the risk lies with making a verbal or even written commitment without upfront costs paid for to deliver hire services, often involving multiple units of labour for many hours at a stretch & installing expensive equipment, to the exclusion of securing business from other enquirers who wanted to book the same slot of availability.
On both sides, you can see the risk involved..
Or perhaps, a marquee hire company falls through at the last-minute leaving a customer out-of-pocket and with very little time to make an emergency booking - not to mention all under immense pressure having invited all those expectant guests.
Either way, the more painful outcome for both parties, should the unthinkable happen, will be the inconvenience of being disappointed, rather than the loss of money. But having said that, the financial loss will undoubtedly also administer its own affliction in the midst of the whole experience.
What is the best payment policy for preempting a successful marquee hire customer collections process?
As with anything in business or otherwise, it is only right to see things from the other party's side and do unto them as you would have it unto you also.
As we said before, you can see the risk from both sides.
We also know that in life, no matter how determined you are to deliver for someone, there are countless obstacles (some more derailing than others) which can prevent the best service being given, such as you would have liked. With such understanding, you would do well to balance the risk in your payment policy as to make allowances for what should happen to the customer should you incur any unforeseen failures.
Granting your customer some means of compensation should you fail, but clearly defining what would constitute a fail within a 'service level agreement' might be a good step (without being overly legal).
Also, within these terms, giving room for a change of mind from the customer should they simply not want to follow through in the end is also realistic.
Making sound considerations also for your obligations to other stakeholders re: that booking, such as your staff, will ensure you don't overlook anyone else's potential for loss.
Some example payment conditions for marquee hire...
(If deposits are taken, be sure to declare if they are returnable under any conditions, or simply non-returnable)
- 25% deposit + remainder settled before the event
- Revenue costs for preparing the booking are partially covered by this deposit, with a follow-up meeting prior to the event where assurances of delivery are given to the customer and the remainder sum taken
- 50% deposit + remainder settled after the event
- All costs are covered for the booking taken by the deposit, and the delivery goes ahead on the days as planned with customer settling further sums on a planned date/time after the event
- All fees paid in advance
- Total sum for the booking is taken in advance for the services being delivered, therefore full profits received for the sale beforehand
- No deposit - settled after the event
- All funds received on an agreed date & at an agreed time once the event is complete. This is of course subject to agreed service levels. Essentially the services are entirely credited.
Impact of failed collections on a marquee hire business
Should a customer delay paying, going beyond the agreed date/time, then business planning for cash flow can be completely knocked out of sync. Where there is financial resilience in a business, other takings can be used to ride out the exposure to loss from the booking which becomes a late payer.
Where late payment strays into uncollected debt, costs of sale and overheads can begin to fall into arrears and debts for the marquee hire business.
Where there is a bottleneck of cash flow, other customer commitments can be adversely impacted (having a knock on effect on service levels and therefore ability to pick up further planned income in full) and staff wages also can become neglected, threatening service capacity to fulfill bookings.
This sort of 'domino effect' can spell disaster for marquee hire contractors with sudden collapse of trade lurking around the corner should a recovery not emerge.
What sort of financial prudence can be exercised to avoid such a business calamity?
Establishing a well organised marquee hire business plan will go along way to mitigating the risk of failed customer collections.
Engineering the following failsafe measures into your business plan may help keep successfully collected payments (accounts payable) high:
- Carry 6-month expenses cash float for tolerance to uncollected payments
- Offer variable methods of collection: face-to-face, internet, phone, SMS etc.
- Set automated, routine communications loops from booking date to collection date re: payment
- Ensure the invoice documentation makes it very clear how to pay
- Ensure deposits covering operating costs are always taken in advance
For deep insights into marquee hire earnings and financial planning, read: "How Much Can You Earn Running A Marquee Hire Business?"
Categorised in: A Guide To Event Business Management
This post was written by selmore