One of the most awkward and uncomfortable situations in business is having to remind clients about late payments on a bill or invoice. Even harder is trying to respectfully request immediate payment without the conflict associated with adding late charges or delaying work submission.
To avoid the conflict, here are 5 steps to successful billing, and 20 tips that are designed to get clients to pay their bills by the due date or even earlier.
Creating a contact with clear payment terms is the first step toward ensuring your payments come when you expect them. Your contract should outline the most important details of your transaction, and each party should consent to the terms of the agreement before work begins. On its own, an invoice is not a legally binding document, but a contract can protect you from potential invoice disputes.
Here are a couple of tips to help you build a solid foundation for quick payments at the contract stage.
It’s essential to have a written agreement between you and the client that clearly outlines terms, deadlines, fees and other essentials. This allows you and the client to get in sync regarding your payment policy, including when invoices are sent and how long they have to pay the amount due. You can emphasize these payment terms on each invoice, such as “ due upon receipt” or “net 30” payment terms.
This is probably best suited for larger projects, but an agreement to pay half the bill at the onset of the project and the other half after completion is a sign of good faith and an indication that you’ll likely get paid at the end of a job. Progress payments will not only help by improving cash flow, but can also help set expectations with your clients to make payments prior to project completion.
Reduce work for your clients by offering a wide range of payment options. The easier it is for them to pay their bill, the less likely it is that you’ll find yourself chasing a late payment. There are a few ways you can make payments easy:
While some clients want to pay by check, credit card or online payment system, others prefer direct deposit. Accepting a wide range of payment methods gives clients every reason to get you paid on time.
Sending invoices in the mail takes too long, runs the risk of invoices getting lost, and adds to the expense of billing clients. Automating the process through smart invoices and accounting software like QuickBooks gets the invoice in the client’s hands more quickly, saves paper and mail expenses, and keeps your bill at the top of their mind.
Cloud-based management solutions such as QuickBooks allow you to create, edit and send invoices from anywhere. This is ideal for those times where a client may need you to revise an invoice or send them another copy of it to get paid. Even if you are away from work and get this kind of request, the cloud-based solution provides a way to respond so there is no delay in payment.
Consistency and courtesey can go a long way in helping you get paid on time. Here are a few ways to ensure the payment process goes smoothly and avoid late invoices.
If the client is providing long-term work, a retainer will allow the client to know exactly how much should be paid and when. This helps them manage their budget more effectively, and it may get you paid quicker.
Invoice your client as soon as possible once the project is finished. Sending your client the invoice as soon as possible links the completed work and payment together, and ensures you’re taking all the necessary steps to reduce your waiting time. Make sure the invoice clearly outlines what the client is being billed for, and include your contact information and the transaction payment terms. You can use an invoice template or invoice generator to help you create a professional invoice that includes all of these key details.
If the client expects an invoice from you on the 1st and 15th of each month, then you need to deliver your bill on those dates. Standardizing the invoicing process can help reduce any confusion about when payments are due. Having a regular schedule could be the difference between getting paid and not getting paid.
While it may seem unimportant, adding lines like “Thank you for your business” and “We appreciate your timely payment” positively reinforces the relationship you have with a client. Be nice, and they just may return the favor by paying on time.
If you don’t receive payment soon after invoicing your client, keeping in touch is key to ensuring your client knows you’re keeping track of the status of the payment. Outstanding payments can be stressful, particularly if your cash flow is impacted, but addressing the situation ensures you’ve done what you can.
Dealing with clients means you’re in a business relationship, so focus on developing good communication with new clients and understanding each other’s side of the partnership. If and when payment for an invoice becomes an issue, a healthy client relationship can provide a way to work through it and help both parties reach an agreement without fracturing the relationship. Maintaining positive relationships with clients may even prevent issues from ever arising.
Although it’s easy to get distracted by daily tasks and project work, part of the responsibility in collecting invoice payments is up to you. This means tracking invoices with invoice numbers, and reviewing accounts receivable weekly in order to determine which clients have and have not paid. QuickBooks organizes outstanding invoices according to their due dates, making it simple to see which invoices are unpaid.
Being proactive before payment is due will help ensure your client is aware of upcoming due dates. Sending friendly, professional reminders up until the due date will help clients remember that the deadline is drawing near or has arrived. Use our overdue invoice email reminder templates to make sure you get paid.
This can be a percentage of the total invoice amount, which often adds up for clients as a cost advantage. For example, a 2% discount on early payment may entice a client to pay the invoice earlier.
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.
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.
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.
To encourage earlier payments, you may want to add a percentage fee for late payments (e.g. a 2% late fee to invoices not paid within 15 days). These additional costs for nonpayment can have a large enough impact on your client’s bottom line to motivate a speedy turnaround.
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.
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.
Give clients a handwritten “Thank You” note or send a quarterly gift to celebrate mutual success. 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.
Not every tip will work effectively for every client, so try different tactics to see which ones produce the best results. And of course, 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.
Call sales: +27 10 203 4300
