Business owners know that there is often some pushback when it comes to getting paid. It shouldn’t be the case, but often when you are working for people directly there will always be some that choose not to pay their invoices on time – if at all! The thing is, you shouldn’t have to chase anyone for payment, especially if your payment terms are outlined clearly on your invoices. So let’s look at how to encourage your clients to pay on time.
You want to ensure that things are paid on time so that you maintain sufficient cash flow to keep your business running smoothly. If you don’t stay rigid in your practices, though, you might end up with a dud invoice template that isn’t going anywhere. Instead, you want to have templates that are easy to use, easy to distribute and clearly outline exactly what your expectations are when it comes to getting paid on time. You want to keep your client relationships as positive as possible so as not to place a strain on the relationship that you’ve worked so hard to build. With that in mind, we have some suggestions on how to encourage your clients to pay on time.
Review your current policies. For both payment and invoices, you need defined policies that are easy to read and understand. If your clients don’t know what the payment terms actually are, how do you expect them to know when to pay and how to do it? The best thing to do here is to make this clear from the day you engage with your client.
Draw a line for rewards and penalties. If people pay early, a discount is often the best course of action. If they pay late, then penalties and fines occurring on top of the bill could be a good way to give them a nudge. Giving your clients an incentive to pay early is a smart policy. Applying penalties for late payments can be effective but isn’t going to be popular so be careful with this approach. You don’t want to create more barriers to getting paid. Some businesses offer a 5-10% discount for a bill paid a week early, for example. If you want to penalise late payers, the same applies to being a week late.
Automate your invoicing. When it comes to your invoice template, make a point of automating your invoice process so that people get their bills the moment the job is complete. The more efficient you are with your billing process the better. You want to integrate electronic payments here, too!
Be clear. When the job begins, verbally remind people when their payment is due and agree to this in writing, too. You want to make sure that these same terms are on their invoices so that there is no issue between when they need to pay and what happens if they don’t.
Make paying easy. Don’t make it hard for your clients to pay! It’s so common to see businesses use methods that aren’t easy and then wonder why clients aren’t paying on time. Offer more than one payment format and accept online payments and different card types to make it easier on you, too.
Engage with your client. Check with your contact that they were happy with your work. Don’t give them excuses for paying late or not at all. If they haven’t paid on time ask them why that is and when could you expect payment. They could also be waiting for an overdue payment. Try to keep the relationship friendly and use enforcement action only as a last resort.