When you sell your services to clients, you rely on them paying you on time. If they pay late or don’t pay at all, it means that the income that you need will be disrupted. You could really struggle if you’re not paid on time, especially if you’re a freelancer and you’re on your own.
It’s often difficult to get clients to pay when you ask them to, but it’s essential to encourage them to do so for the survival of your business. So how can you make sure that you not only always get paid but that you also are paid promptly and to a deadline?
Use this guide to ensure that every time you invoice a client, they pay within the timeframe that you have given them.
Choose the Right Clients
When you first start your business, it can feel like you have to take whatever comes your way to make ends meet. However, part of growing your business should be knowing which clients you should work with. There’s no point in agreeing to work with someone if they never pay you or always pay you late. Before agreeing to take someone on as a client, you can do some research to find out more about them. You might discover that they have form for not paying people on time or perhaps you will find out that they have a good reputation.
Send Invoices Promptly
If you want people to pay you quickly, you need to charge them quickly. The sooner you send an invoice to a client, the faster the clock will start ticking on when they have to pay you. If you give them a 30-day window to pay their invoice, it’s best to start those 30 days as soon as you can. Remembering to send an invoice isn’t always easy, so it makes sense to give yourself reminders. As well as setting up reminders to send out invoices, it can also be useful to have a template for your invoices. This makes it easy to create your invoices and make sure they’re all the same format too.
Make Your Payment Terms Clear
It’s not just when you send your invoices that matters, but also what is on them. Including the right information and displaying it clearly will help to make it clear to people what your payment terms are. Make sure that you let people know how long they have to pay and what happens if they don’t pay on time. You might also include other information, such as whether they get any discounts or rewards for paying early. Don’t forget to let your clients know how to pay you, whether it’s through a bank transfer or another method.
Offer Different Payment Methods
When your clients have different payment methods to choose from, it can make it more convenient for them to pay however they want. They will have a few options that they can use, so they can quickly complete their payments. There are a few payment methods that you might want to offer. You could allow them to pay over the phone, send a check, or perhaps complete an online bank transfer. You could also use online payment portals and clients, such as PayPal, which can make it easier for some clients to pay online. Some people may prefer more traditional payment methods, while others want to use more modern ones.
Encourage Clients to Pay Early and on Time
If you want clients to pay on time, and perhaps even pay early, you can give them incentives to do so. When they know that they will be rewarded for making their payment before the deadline, they will be more likely to pay. You can, for example, offer a discount to any clients that pay early. If they pay on the same day or within the same week of receiving your invoice, you could give them money back or charge them less. You could also reward them in other ways, such as by extending credit to clients that have shown they can pay on time.
Be Careful Extending Credit to New Customers
A credit policy is important for small businesses to determine if and when a client might be allowed credit and the terms that will be used. Before allowing clients to have credit, it’s smart to carry out a credit check so that you can ensure they are in a good position to make payments. It’s best not to rush into extending credit to new customers because you may not be able to trust them. Instead, it can be a reward for long-term clients who have shown that they are trustworthy. If you do want to extend credit to your customers, clear policies are important.
Have a Lawyer on Your Team
It’s always useful to have a lawyer on your side when you’re running a business. Professional legal help can give you the information and advice that you need to grow your business, and it can help you get out of sticky situations too. When someone isn’t paying up, you may need to find a lawyer to help you get the payment that they owe you. A lawyer can also help you with drafting contracts so that you have the legal reinforcements that you might need if you need to prove that someone hasn’t paid you. Having everything written down clearly gives you evidence that you can use if necessary.
Ask for a Deposit or Retainer
Getting partial or even full payment up-front is a smart thing to do if you want to check that a client is going to pay their invoice. You might ask for half of the final bill before you begin working or a smaller percentage as assurance that your client will pay the rest. This tactic is a good idea if you sell services that result in significant invoice amounts. You don’t want to put in all the work, only to find out that your client isn’t going to pay at the end of the project.
Create a System for Missed Payments
What happens when a client misses their payment deadline? If you don’t know, you should make sure that you create a process for what happens next. Firstly, you will want to ensure you know when someone is late with a payment. This might require a flagging system to help you keep track, depending on how many clients you usually deal with at the same time. A standard procedure for contacting the client, including which method you will use to contact them, will get you started. There’s no need to be too firm at first. A phone call or email as a reminder can be a good option, as many people simply do forget.
Another option is to get in touch by sending a letter. This ensures you have a written record of communication, and can come across as a slightly more serious and urgent reminder that payment is required. You can also send collection letters via email, which ensures you have a digital copy and record. If payment is not made after the first letter, a series of further letters can be used to state that payment is still due and to express concern.
Offer a Payment Plan
Sometimes you might have a client who is struggling to pay, but you don’t want to lose them as your client. However, you do want to make sure you collect the money that they owe. If this is the case, you might want to consider offering a payment plan to a client who is having trouble paying the full amount of their invoice. By splitting the bill into a few smaller payments, they might find it more manageable. Instead of having to come up with the full amount, they can pay just a portion of it and pay the rest later. While you might not always be willing to do this, it can show that you’re willing to be flexible when necessary.
Use a Collections Agency
Using a collections agency can be the smart thing to do if you can’t get your client to pay up. It’s likely to be one of your last options, but it might be necessary if they’re not willing to pay you without it. When you use a collections agency, they will collect the amount that you’re owed for a fee or a proportion of the amount owed. They are experts in debt collection and can help you to collect the money that your client isn’t paying.
Know When to Let Go of a Client
There are times when you have to accept that a relationship with a client is no longer working. If you have a client who is consistently late with their payments or not paying at all, it might be time for you to drop them as a client. Otherwise, you may end up wasting your time and money when it’s not necessary.
Take these steps to make sure that you always get paid, no matter how much is owed to you.