Event planners often face cash-flow issues after a major event. They need to pay employees and vendors, but they might not have received full payment from the client yet. If you’re stuck in this situation, use the following strategies to prevent it from happening again.
Get a Larger Upfront Deposit
Your clients know that you have to take care of certain expenses after a major event ends. Simply change your contract to include a larger deposit. You don’t have to charge the full fee up front; just make sure you have enough cash on hand to cover your out-of-pocket expenses.
The deposit might depend on your event planning fee structure. For instance, if you charge by the hour, you could use a flat-rate deposit that goes toward the final bill. That way, you can set the deposit at an amount that won’t leave you scrambling for cash.
Another option is to ask for expenses up front. Calculate how much you’ll spend on vendors, merchandising, and other costs, then send your client an invoice before the event. Afterward, you’ll collect your fee and any other charges owed.
Get a Loan
Working capital loans can prove particularly useful for event planners because they take the stress out of managing cash flow. Specifically, consider obtaining an accounts receivable loan. This type of loan is based on the amount of money clients owe you for services under contract.
Let’s say, for instance, that you have a signed contract with a client for an event that will cost $20,000. You could get a working capital loan based on that contract. The lender supplies you with the cash in advance, then you reimburse the lender when you receive payment from the client. Other types of working capital loans, such as short-term loans and credit lines, might also become useful.
Work With a Third Party
Some venues will pay vendors after a major event, then send you an invoice with the total bill. It works similarly to the contract you sign with your client. The venue owner or manager pays the vendors, you pay the venue, and the client pays you, only it takes place in reverse.
While you can’t find this arrangement with every venue, you might be able to strike a deal with a third-party broker. Just remember that you’re liable for the charges even if your client defaults, so make sure you trust the customer before you sign any contracts that hold you responsible for charges incurred.
Let the Client Pay the Expenses Directly
Event planners don’t always serve as the go-betweens for every transaction. In fact, some clients prefer to handle the expenses on their own because they don’t have to do any fact-checking later to make sure they’re paying the correct amounts. You might offer this option in case your clients want to take advantage.
Your event planning business can’t survive if you don’t pay vendors and other suppliers on time and in full. Avoid losing face — and potential business — by securing your cash flow before you sign a contract with a client.