You rely on your customers to pay their invoices on time to keep your business cash flow going, so customers who don’t pay are particularly frustrating. As an independent contractor, you don’t have time to track down clients who fail to pay on time, and you can’t survive long if you have no money coming in. Standardizing your billing procedures and following up immediately when someone doesn’t pay can help.
Having a standard procedure for billing and handling late payments is key. Start with a detailed contract that outlines when the client must pay. Include late fees for delinquent payments as a way to motivate clients to pay up. Be professional yet firm in these expectations.
Look at your invoicing method to see if it needs changes. Add all the important invoice information on every bill you send to a client, including your information, date, invoice number, detailed list of services, terms, late fees, total amount due and due date. Even if you’ve already sent your late-paying client an invoice, send a new one in the detailed format.
Decide how to handle late payment situations. Add a fee if the client misses the due date. Follow up with a standard procedure, such as emailing a reminder or calling the client.
If those methods don’t work, consider sending the unpaid bills to a collection agency. In exchange for collecting the outstanding balance, the agency gets a percentage of the amount. While you don’t recover the entire amount, you save time by letting the agency handle the collection process.
Another option is to take the client to small claims court. Deciding if you should sue a client comes down to how much time, energy and money you want to use. If the amount is relatively small, you may decide it’s not worth the hassle.
If you currently have a customer who isn’t paying, look at the facts of the case. Review the contract and the invoices you’ve already sent. It’s also a good idea to start documenting all contact you have with the customer as a record. Start your newly created late payment procedure.
Tracking down late payments takes you away from your work as an independent contractor, but that money is also essential to your business thriving. Set your payment policies now, and enforce them consistently and professionally to encourage clients to pay on time.