Since Andrew hasn’t answered your questions. You should probably tackle bonus separately after you’ve sorted out your billing problems.

“if the designer has billed out 150 hours and we can’t get the money in, we end up paying our designers for something we haven’t gotten paid for yet, which really hurts our bottom line”

Yet if you hold back paying your people and never get paid yourself, their bottom lines won’t be too happy either. You need to get clients to sign off on an estimate, of course you need to create the estimate first. No sweat, its just that, an estimate, but at least you have a signed agreement with the customer that this is what you “estimate” it will take, and if it starts to look like it going to take longer (thru fault of the client or yours), you’ll let them know before you get in too deep.

Now if a (prospective) client isn’t willing to sign off on an estimate (basically that they’ll pay the amount if you deliver the project as promised), I’d wonder if they’d be difficult to get money out of when billing time comes around.

Another tactic with first time clients is to request 30-50% upfront, since this is a little like dating, you both have skin in the game. Once again, if the client balks, you have to question if they’ll hold up their end of the deal come invoice time.

Late fees. Put these in place and have them mentioned on the estimate that you have them sign. Day 31 that they’re late, fire off a revised invoice with the late fee added. You can also send friendly reminders a few days before 30, to make sure they’ve gotten your invoice. No sense causing tension if they’ve simply not gotten your invoice (has happened)

Prioritize your good payers. These clients are like gold. Do whatever it takes to keep them happy and serve them first before the slow payers. When you’re hungry, you’ll rely on them first.

After that, find out who your good (and happy) clients do business with as well, perhaps they could refer you.

Hope it helped… good luck!

She ended up leaving for a higher paying job, but as soon as we could afford her again, we brought her back. But this time as a programmer and she’s dedicated to one product that we are selling.

I have one question for you Andrew that I’ve been dealing with for a couple of years now. What is a good compensation package for programmers and designers? Not just the normal pay, sick time, vacation, etc… but I’m really struggling with their bonus structure.

I’ve tried several approaches that include 5-10% of the project, 5-10% of billable time, and just a flat bonus each month. None of these seem to work very well for us because our main client base is a huge plutocracy that pays 60 – 90 days late all the time. So if the designer has billed out 150 hours and we can’t get the money in, we end up paying our designers for something we haven’t gotten paid for yet, which really hurts our bottom line.

What is a good approach for this? I know, I know. I need to tighten up our payables, but no matter how hard we try, they just won’t pay on time.

SO I guess this has lead to two questions:
1. How do you structure your bonuses for designers and programmers?
2. How do we get our clients to pay on time?

The hard balance to walk is, if they are really good you want to court them a bit. But at the same time you want to see how they will hold up working on tight timelines, with tought clients, and all of the other realities of the work environment.

We always err on the side of showing them the most real scenario (sometimes we artificially shrink the timeline to the point where it is almost impossible just to see how they respond). A seasoned coder or designer will handle the situation appropriately.

We also always try and put new hires on existing client work. Managing the relationship with a new client is sometime hard enought. Working with a new client and a new employee can be a recipe for disaster.