How Switching to Upfront Payments Can Help Small Businesses Scale

I've seen cash flow issues close business doors countless times. We’ve all heard the potential recession talk, and as we head into unsteady economic times, it’s critical that service-based businesses take control over their cash flow. "Bill me later" and hourly billing are outdated practices that professional services businesses can no longer afford to entertain.

Working in SaaS for over 15 years has taught me that getting clients onto upfront, recurring billing is key to financial stability. It’s time professional services businesses learn from e-commerce and SaaS—and ditch outdated billing models for good.

Take Tiffany Davis, the CEO and president of Washington & Co Inc., an accounting firm in the Washington, DC, metro area. Four years ago, she decided she was done processing payments manually and worrying about cash flow. Davis was already managing the business and her staff, pitching and closing clients, providing services, and handling payments every month.

In the wake of the pandemic, she revamped her business model, structured her services into tiered pricing packages, and tied those packages to upfront, automated payments. Today, she runs an innovative and client-focused business with zero accounts receivable and never worries about cash flow.

If you’re a small business owner providing professional services, this may sound like an unattainable dream—but Davis will tell you it’s not. Automated upfront payments are a critical part of reversing the cycle of working for cash flow and instead getting cash flow to work for you.

Upfront payments should be the norm for professional services because unpredictable cash flow hurts small businesses and the economy.

The Late Payment Epidemic for Small Businesses

For small businesses, cash flow is king. Late payments jeopardize cash flow. When payments don’t come in on time, companies can struggle to meet payroll, pay rent, or cover essential business expenses. If revenue is unpredictable, you can’t plan for hiring or capital expenses.

Yet more than half of all small businesses are not paid on time. This problem is even worse for professional services. Most service-based businesses still invoice and accept payment after services are provided. A Federal Reserve Banks report found that slow-paying customers are more prevalent in businesses that accept payment after delivery. In some industries like accounting it’s even more pronounced. Our own Ignition survey found that 94% of firms experienced late payments.

Upshot: eliminating late payments starts with taking client payment details upfront—or better yet, taking payment before the work even begins.

Chasing Checks Wastes Time and Resources

No business owner wants to spend time emailing, calling, and following up on late payments. It's also not the best use of your team’s time. That time could be better spent supporting clients or growing the business. Clunky payment processes and delays also damage client relationships and create tension.

More reasons to switch to upfront payments include:

Stop negotiating twice. Slow and late-paying clients force service-based businesses to negotiate twice—once to secure the contract, and again to collect payment. This shouldn’t be the norm. Once a contract is signed, payment should be a done deal on the agreed date.

Hourly billing is dead. Hourly billing emphasizes time spent rather than outcomes delivered. It also makes it harder for clients to understand the value they receive. If you’re still billing by the hour and invoicing after the fact, your staff are wasting valuable billable hours with time tracking. Clients get frustrated when they don’t know where their hours go. You’re risking contested bills when clients challenge how long a project takes.

Clients are ready for a change. Transitioning to upfront, fixed fee billing simplifies relationships. With clear fees and payment terms established early, misunderstandings and disputes become far less common. Clients appreciate knowing what they’re paying for—and what results they can expect. It allows your business to clearly define the outcomes they deliver, aligning with what clients value most.

Attract better clients with better policies. Upfront payment policies attract clients who value your services and are committed to long-term relationships. This helps weed out the problematic clients who drain resources and are bad payers. It reinforces the value of your time and expertise and ensures clients understand expectations clearly from the outset.

Subscription models: the future of professional services. E-commerce and subscription services have normalized upfront payments. Think about Netflix or business software like Zoom or Slack—all require payment upfront. Subscription models offer ongoing value and predictable revenue through automated billing. It’s time services-based businesses embraced subscription pricing and upfront payment models to align with evolving consumer expectations.

How Do Service-Based Businesses Eliminate Late Payments?

1. Revisit Your Pricing and Billing Model

If you’re still billing by the hour, chances are your business is endlessly stuck in the "work for cash flow" cycle. Moving to upfront, fixed fee billing is the first step toward more predictable cash flow.

2. Shift to Taking Client Payment Details Upfront

Get a payment method on file at the start of every client relationship, before the work begins. Platforms that embed payment details into contracts are now widely available and user-friendly. This puts you in control of your cash flow and when you get paid.

3. Invest in Billing Automation

Remove the friction of manual invoicing and collections after the fact by automating the entire payments process from the moment the contract is signed. As Tiffany Davis says, “Automation is the way to go. If you're not automating, you're wasting so much time.”

Scale Your Business and Stop Chasing Checks with Upfront Payments

Switching to upfront, automated payments eliminates uncertainty, and frees up time to focus on growth. Your clients get clarity. You get stability and the holy grail of predictable cash flow. Only then can you truly scale your business sustainably, whether increasing strategic hiring or investment in new services.

About the Author

Greg Strickland

Greg Strickland is the CEO of Ignition, which helps professional services businesses manage client relationships, billing, and cash flow. A tech industry veteran with over two decades of experience, Greg has built a career at the intersection of technology, leadership, and innovation. His platform is used by over 7,500 businesses globally.

Company: Ignition
Website: www.ignitionapp.com
Connect with me on LinkedIn.