Having a conversation with your clients about prompt payment can mean the difference between a smooth-running business and cash flow woe. These five tips can boost your confidence and avoid the dreaded ‘money talk’.
1. Set expectations from the start
It’s essential to let your clients know from the get-go what’s expected of them in regards to payment. If your payment terms deviate from industry standards (e.g. two weeks instead of 30 days), let your clients know upfront so they’re not surprised down the track.
Communicate your invoicing details clearly and accurately (in writing, if possible) and ensure you know who the invoices should be sent to, if they require any information to process payment and the client’s preferred mode of payment. Handling these technicalities early on will pave the way for smoother transactions in future.
2. Inform your clients of updates in accounting procedures
A subtle way of starting a conversation about prompt payment is to inform your clients about updates in your accounting procedures.
It may be as simple as letting them know your company is doing away with paper invoices completely or that you’re changing the payment terms, but you can also take the opportunity to inform them of any late fees or incentives for early payment.
3. Be proactive, but also prepare your clients before the talk
Keep in mind that most clients won’t proactively ask for an invoice – if you want them to pay on time, you must be just as prompt. Stay on top of what you’re owed by using accounting software that tracks your outstanding payments and shows what’s due every month.
If it’s necessary to start the conversation about prompt payment with your clients, don’t surprise them. Sending your clients an agenda ahead of a meeting – with billing as one of the items for discussion – is a subtle way of letting them know what to expect.
4. Offer your clients options
If your clients are missing payments, it might be because there are internal issues such as cash-flow problems or unforeseen delays in the accounts department.
Offering your clients options such as payment extensions or the ability to pay in installments can go a long way to preserving those all-important relationships, and you may even secure repeat business in future thanks to your understanding during their time of need.
5. Be direct and remember: This is business
Dancing around the money conversation only makes things more awkward. Your clients know you’re running a business, and there’s nothing wrong with being upfront about what you need.
Be respectful and understanding – but also be direct. If your reminders have gone unnoticed, call your client and speak one on one. If necessary, halt your services until payment is received.
The sooner you approach the problem, the quicker you can resolve any late payment issues.
For more expert advice about running your small business, visit our small business advice hub.