What’s the best IPS financing option: payment plan or layaway agreement?
Updated: Jan 31, 2022
So you made the big move from getting paid up front for a set of digitals to selling your images after a paid session?
Congratulations! According to the photography business gurus, you're about to make bank.
IPS (in-person sales if you haven't come across this term before) may look different now than pre-pandemic. But whether you are going to a client's home, having clients pop into your studio, or showing them their digital gallery via Zoom, its still IPS.
Let’s be honest. Some folks can't manage those IPS prices in one-time payments. Not everyone has that kind of cash just sitting in the bank. And interest on a credit card can be a bitch.
Maybe they can throw down $3000 on your linen-bound album or metal wall print. But giving them an option to break the payments up will make it easier for folks to get the larger package or more images. You don't want to chase down folks for missed payments with custom products burning a hole in your pocket.
So, what's the solution?
Payments where you aren’t chasing folks down, aka some kind of plan. You have the option for them to
pay before the session
pay between the session and getting products or
pay after getting the products.
Now, I stick by the rule of always getting paid upfront as much as possible.
At an absolute minimum-50% of the full price before you lift a finger.
So that rules out getting paid after giving your people their gorgeous images.
That leaves us with a payment plan when your clients picked out their images and need to finish paying for them
If they know they want a package, they could even start making payments to you before the shoot. Kinda like going to KMart in October to put toys on layaway for Christmas.
So what make’s more sense for you?
Let’s look at what Virginia law says about payment plans and layaway plans first, then balance the pros and cons of each IPS financing option.
Cuz I want you to get paid!
Post session payment plans
First up, the one you are probably more familiar with. Your client falls in love with your images, but doesn’t have the cash to pay for the package in full right now plus you need a moment to place the orders anyway. So you break up their payments into 2-6 installments to make things easier. This is pretty simple and easy for everyone to understand, but can get tricky when things go wrong.
Virginia law doesn't have a lot to say about payment plans. It does have a lot to say about late fees, who owns what when and what has to be in writing to be useful in a court or bank dispute.
So let's chat.
You have to put your refund and exchange policy in writing or folks can return anything.
You have to put your late fee in a contract or it'll get thrown out in a courtroom.
You can't have too high of a late fee or that will also get thrown out in a courtroom.
Ripped up and thrown out just like that
Pros here are that the money is yours the moment you get it. That's because you are being paid back for fronting the costs to get the package to the client.
One con is the client may have different expectations of when they get their images/products. Maybe they think they get them when they make that first payment. Then what do you have to ensure you get paid other than a contract. I love setting expectations in contracts but getting what you want is easiest when the contract and process match up. The reality is, it's a lot easier to say ‘pay me to get your products’ than to say ‘you have your products, now pay me’. So you have to address when you order the products, when they are available for delivery or pickup and what happens if they don't pick them up. It's not clear unless you talk about it (at least in writing).
With a traditional payment plan, make it as easy as possible for your client to pay you. Typically, that looks like an automatic payment on a credit card (like *Netflix*). But you need their written permission to charge a card when they aren't physically in front of you. Otherwise, you risk offending the chargeback gods and having that fight.
Another pro is that you decide when you are going to order products/release images, if it's explained up front. If a vendor stops making that particular print or the quality isn't as you thought it was, you have to manage that time between ordering and delivery to the client. But you can control your cash flow around this process as you see fit. And that’s worth its weight in gold.
The biggest con here is basically, there's little to no flexibility for your client once they place this order. You are already depending on that money to come in. maybe you already placed the order for the products. Maybe you released a digital gallery for them to check out their images (and they are screenshotting and posting on IG already….FYI I don’t recommend this at all). A sudden bill comes up and they miss a payment or want to get a smaller package. You say they already bought x and you've already started the work on it, but they cant change anything. There aren't really options at this point for you and the client to not leave with a bad taste in your mouth.
Second up, I give you another option.....
The layaway plan
The Virginia Consumer Protection Act actually defines what a layaway agreement is and 100% requires that there be paperwork presented to the client to make it legit. It has to have all the details about when it kicks in, how payment has to be made, what happens if someone misses a payment, when a client can pick up their products, EVERYTHING.
That’s a lot right? Like piles and piles of printed shots spread out everywhere.
So, let’s talk about the pros and cons.
The photographer handles the products your client orders under a layaway plan until the plan is paid in full. So, if the hard drive crashes and you can't get them digitals, or your studio floods and the prints get damaged, you are 100% responsible for fixing that.
If payments are not coming in according to the schedule, you HAVE to store the client's products. You can’t get rid of them.
I put a clause that says when a payment is missed, the entire order is cancelled and all money paid to the photographer is forfeited if the client doesn’t get the account back up to date within 30 days. That may sound extreme.....
But I want the contract to be the bad guy. Then you can be the generous business owner that works out a deal with your client (if you think they deserve it, of course).
One of the other cons of a layaway plan is that you haven't really earned that money until they select their products. So realistically, it should stay in a different bank account until then. You act as a bit of a bank holding the money for your client until you have actually earned it. That money isn't yours when you first receive it, just like a deposit.
One of the huge pros of doing layaway plans is you can give your clients a bit more flexibility if life happens, without it costing you anything. There are 2 ways I like doing this.
First is to allow clients to change the product package they want at any time up until their ordering session/image reveal party. The trick is that changes can only be made to packages that cost at least what the client already paid to you. This way, you don’t need to refund money at any point. AND your client is rewarded with the ability to pick a package more suitable to their budget the earlier they realize their budget isn’t what they thought it was.
The second option to give flexibility is to allow clients to transfer their layaway credits to another client, preferably someone the original client brought to you. If you allow sessions and layaway credits to transfer, your clients are never going to be ‘out’ the money if they can't attend/afford your sessions. They just have to work to go sell their session/credit to someone else.
These options have to be VERY clear in your layaway contract and explained to your client upfront. That way, they know exactly what they can and cannot do if plans change.
This may all sound like a lot, but if you have good contracts in place, it should be easy enough to check.
If you don’t or are just a bit confused, check out the template store or send me a DM over on IG. I’m happy to explain more and I’ve got templates for both of these options, to make sure your business is covered! You can find the layaway plan here and the post session payment plan here as soon as we get them up. In the meantime, just find the "request a template" link in the store.
**Disclaimer: This is only general information, not legal advice specific to your situation, and does not create a client-attorney relationship between you and Samantha Bradshaw, a Virginia licensed small business lawyer, or InLine Legal, a 100% virtual law firm. If you need legal advice, please contact a lawyer in your area.