Regardless of your industry, whether you run your own small business or you’re self-employed, you’re bound to experience slow-paying clients. Aside from it being an inconvenience when it comes to organising your finances and keeping up your cash flow, if it starts to become the norm, it can affect your ability to operate – and even risk putting you out of business.
Having said that, there are some simple steps you can take to minimise the pain of late payments and maximise your chances of being paid on time.
1. Check out your customer
Run a quick check on a new customer’s credit history and do some research to ensure they are legitimate. There are plenty of online resources available to help you gather information about a business’s past bankruptcies or insolvencies, like Equifax’s Business Credit Express service.
Many new clients will either be established businesses with good reputations or referred by colleagues, and so are generally aboveboard. You should, however, be vigilant when it comes to businesses with little or no history, or phoenix businesses – those that deliberately liquidate to avoid tax and other liabilities, like outstanding debts.
2. Negotiate payment terms upfront
Make sure you negotiate clear payment terms before you start work on new projects, so all new and existing clients are aware of their payment responsibilities from the outset. If it’s a big project with a hefty final payment, you might consider suggesting a regular payment schedule or retainer that works for both your and your customer’s circumstances.
3. Keep detailed records
Keeping detailed records of every order or project will not only help you stay on top of where your payments are at, but you can also use it to settle any disputes that may arise down the track.
4. Send your invoice asap
Invoice your client as soon as possible after you’ve completed the agreed work. The faster you invoice, the sooner you’ll get paid. If you’re struggling to keep your invoices in check, or you don’t have the time to chase slow-paying customers, it might be time to take your finances online. Some accounting software packages, like QuickBooks Self-Employed let you create and send invoices on the go, and automate reminder notices citing the date of the original invoice.
5. Make it personal
If your emails and reminder notices are falling on deaf ears, reach out to your client with a personal thank-you note, attaching it to your invoice and mailing it to their home address. You could also give them a call to make sure they’re happy with the work before reminding them of the agreed payment terms.
Getting to know your new clients and keeping detailed records can help you avoid late payments and problem customers down the track. If you’ve exhausted these avenues, find out more about recovering outstanding debts.
Self-employed? Get more helpful tips and advice here.