If you’re reading this it’s likely that you’re facing one of the most common issues related to service based business - getting paid on time.
Whether you’re just looking for ways to improve your process or if you have a forgetful client on your hands, consider these 8 tips to start getting your dough on time and without the hassle.
1. Incentivize them.
There are a few different ways that you can incentivize clients to pay their invoices faster. My particular favorite is to simply thank them in advance of the payment. This little hack sounds too simple to be effective, but I’ve found that showing appreciation for a timely payment before you receive it uses the psychological principle of reciprocity in a very effective way that doesn’t cost you anything.
Another way to incentivize clients to pay faster is to offer a marginal discount for paying early. This is often used for product based businesses that purchase large shipments from suppliers. The terms might state that payment is due within 30 days, but paying 10 days early will earn the client a 5% discount.
2. Use upfront payments.
Requiring upfront payments can be very helpful for businesses that pull it off successfully. After all, you’re not doing the work until payment has hit your account and it doesn’t get much faster than that.
Just make sure you’re using this tip intelligently. If you’re a small business or freelancer it’s unlikely that you’ll have the leverage to require upfront payments unless the demand for whatever you provide is higher than the supply of it. Be mindful of using this tip when your client is a large organization with established policies because you will have no luck trying to get those clients to change their terms just for you. Just make sure you don’t let late payments goon for too long, otherwise you’ll be digging yourself out of debt.
3. Establish clear invoicing terms in writing.
Before you get to work for any client make sure you both are crystal clear on the expectations and invoicing terms. Taking the time to establish these terms in writing can not only make it easier to get payment when you expect it, but it will always come in handy to fall back on in case there is ever some misunderstanding.
Contracts tend to be multiple pages and often don’t make for an easy read. If you’re dealing with a busy business owner or executive, it’s a good idea to create a simple, one page, bulleted list with key information on it. I’ve seen more than one situation where payments came in late or other things happened that should have been prevented by the contract, but still occurred because the client simply didn’t spend the time to dig out the details from a long contract.
4. Use recurring invoicing.
Control the payment schedule from your end of the agreement by issuing recurring invoices. This will make your job a lot easier and also help to keep a reliable income when the client pays them on time. Use this tip in conjunction with #1 and incentivize your client to set up recurring payments whenever possible.
5. Set reminder emails.
When you have a specific date that you bill clients on and both parties are clear on their expectations you’ll be sure to get paid fast and on time, right? Maybe in a perfect world, but the reality is that clients, like every other human, can forget about things.
To make sure that you get paid as fast as possible and don’t have to start spending time chasing down late payments, set up an automated reminder email to go out a few days before payment is due. Be polite and don’t forget to let your client know how hard you’re working for them and add a friendly reminder that their payment is coming due in the near future.
6. Automate the follow-up.
When a client pays you it’s always a good idea to follow up with them to confirm the payment and thank them for being a valued client who pays on time. Spend a little bit of time writing an email that expresses your gratitude and reminds them that they make your business possible.
When you reinforce positive behavior, even with something as simple as a “thank you”, it’s increasing the likelihood of that behavior in the future. Make sure your message is appropriate for all of your clients, and send it out to them the day after your payday.
7. Build strong client relationships.
Tracking down missed payments is never a good conversation. At best it’s slightly unpleasant and sometimes it can be downright uncomfortable for both parties. When you have a strong relationship with your clients, these conversations become easier and information flows between you both in a much more organized and simplistic way.
If at all possible, take some time to get to know your client, make sure they understand the value you’re adding and that you understand the type of person they are. When you have a strong relationship it gets much easier to approach them about things like paying early, faster, or even just on time.
8. Keep a consistent invoicing schedule.
When you have a schedule established it becomes so much easier for all parties involved in the invoicing process. The best way to do this is to set your own terms for invoicing and apply them to all clients. For example, expect all clients to pay their invoices on the first of the month rather than collecting payments based on the individual engagement, or worse - based on the client’s terms.
A consistent invoicing schedule helps to keep the client on track and avoids the mistake of missing payments, so, whenever possible, use your own terms for invoicing and keep them universal.