Manage outstanding invoices
When payments are past due, being proactive can help get the money you’re owed into your hands more quickly. Here are some tips for handling outstanding invoices and late payments when they do arise.
14. Don’t waver on payment terms
Unfortunately, human nature takes this flexibility as an excuse to continually be late. Although life happens and you may offer a grace period once, remind the client that payment terms have not changed.
15. Don’t hesitate to ask for past-due payments and regularly follow up
You’ve done the work, and now it’s up to you to make sure you get paid. Having a standard approach to following up on outstanding payments can make the process of reaching out less stressful. If you haven’t received payment after the first time you send a reminder, consider a polite phone call to confirm your client has received the invoice and see if they have any questions.
16. Penalize late payment
To encourage earlier payments, you may want to add a percentage fee for late payments—as long as a late-fee policy is documented in a written agreement of the contract. These additional costs for nonpayment can have a large enough impact on your client’s bottom line to motivate a speedy turnaround.
A reasonable late fee percentage for businesses is 1% to 2% of the invoice total charged monthly. For instance, say your late payment fee policy is 2% monthly, and you have a $14,000 invoice that’s a month overdue. A 2% late fee of $14,000 is $280. Add that late fee to the standard monthly charge ($280 + $14,000), and the new invoice total is $14,280.
17. Hold on to work until you get paid
Like the penalty tip, negative reinforcement has to be deployed in certain situations. The goal is to highlight that a working relationship involves transactions where work and payment go hand-in-hand.
18. Consider renegotiating payment terms
The last thing you want to do is lose a client over invoice terms. They may be in the midst of growing or getting another round of funding, yet have a history of paying on time. To show that you understand their changes and to solidify the value you place on the relationship, you can discuss options for payment plans or agree to different payment terms for a temporary period of time.
19. Reward and recognize clients
When clients feel appreciated, they’re more likely to prioritize your invoices and stay loyal to your business. A simple “Thank You” can go a long way, whether it’s a handwritten note, a small token of appreciation, or an extra perk for consistently paying on time. This is not bribing them to pay invoices, but it does grease the payment wheels by letting them know just how much you appreciate their business.
Here are some simple ways to recognize and reward clients:
- Personalized thank you notes: A handwritten or custom-printed note adds a personal touch.
- Exclusive discounts on future services: Offer a small discount for early or consistent on-time payments.
- Loyalty program perks: Provide bonus perks for repeat clients who always pay on time.
- Quarterly or annual gifts: Send a small appreciation gift, like a branded notebook, coffee shop gift card, or industry-relevant item.
- Shout-outs on social media: Publicly thank loyal clients (with their permission) for their support.
- Referral bonuses: Reward clients with discounts or incentives for referring new business to you.
- Holiday or anniversary gestures: Recognize important milestones with a small gift or special offer.
20. Adjust your approach and plan ahead
Not every tip will work effectively for every client, so try different tactics to see which ones produce the best results. And remember, the best way to get paid is to protect your business by signing a contract and creating a professional invoice that outlines all terms of the job.
Your contract should outline all payment expectations upfront, including due dates, accepted payment methods, late fees, and any penalties for nonpayment. It’s also helpful to include a clause specifying what happens if a payment is overdue, whether that means additional charges, withheld services, or legal action. To further protect your business, include a dispute resolution section that outlines how to handle conflicts.
Your invoice should be just as clear. Include the total amount due, a breakdown of services, the due date, and payment options. If you charge late fees, add a simple note at the bottom: "A late fee of X% applies to overdue payments.”
