I’m glad to say, my clients are fantastic. It’s the nature of my business that I work with my clients closely, on an ongoing basis and often strike personal friendships with them. For these reasons, and also because they are good, responsible business owners, they are largely prompt payers who value the services we provide. Touch wood!
But there have been one or two occasions when this was not the case. It doesn’t happen often, but that doesn’t make it any better!
Small businesses rely on good cashflow to survive. If the cash runs out, your business dies, it’s as simple as that. So when a client withholds payment, for any reason, it can be extremely stressful.
Luckily, I took good advice when I started up and put in place a few safeguards to minimise the likelihood of this happening. But these haven’t been completely foolproof, and I’ve learned some tough lessons along the way.
So today, I thought I’d share with you my tips to maximise your chances of getting paid – a combination of things I do, and things I’m going to start doing from now on! Here they are:
Have a signed service agreement
Before you begin to work for potential clients, you must make them aware of your terms and conditions, which also includes your payment terms. A good way to do this would be to have a service agreement drawn up that is signed by both parties, so that there’s no room for confusion later on.
Always quote accurately
Remember to include all of the potential costs in your quote, and include a contingency if necessary. This way there are no nasty surprises for your client and less chance of queries being raised.
Take a deposit
When a client is willing to pay a deposit it’s quite often is a good indicator that they will pay their final bill promptly, or at least within the payment terms stated in your terms and conditions. And if they don’t pay, then at least you’ve not done the work completely for nothing!
Communicate with your client
Let them know how the project is going and keep them informed of any additional costs or changes, before you carry out the extra work.
Invoicing as soon as possible will ensure that your excellent service is at the forefront of your customer’s mind, meaning they will be more inclined to pay quickly.
Offer different payment options
Ensure that all your payment options are on your invoices, including bank details, an address to send cheques and PayPal details if appropriate.
Offer an incentive for paying early
This could be a small discount on their next project, or another token gesture. You might feel that incentivising early payment is a more positive approach than having a penalty for paying late, but this works too.
Always let the customer pay when they offer
Don’t be too nice – if the customer offers to pay early, accept! They may be having a good cash month and want to take the opportunity to pay you while they can.
If you do end up with overdue invoices and late-paying customers, here are some tips for what you can do next:
As soon as a payment is overdue, send out a gentle reminder. It doesn’t have to be a letter full of red ink, but simply a friendly email with a statement attached.
Communicate with your client, again!
If their payment is late, don’t automatically assume the worst of them. Speak to your client by phone or in person if you can, and try to find out why. Try to be flexible if you can – everyone has cash flow challenges sometimes and your understanding will be repaid with your customers’ loyalty.
Hire a credit controller
You may choose to hire a credit controller from a company or a freelance credit control specialist to see if they are able to collect the payment on your behalf (there may be a small commission for this service).
Keep a record
Be sure to keep a record of all the communication with your customer regarding the project and the payment that is overdue, just in case the money is not forthcoming.
Know your last resort
If a payment goes unpaid for a considerable amount of time, outside of your payment terms, then you should know what your last resort is – usually, it’s the Small Claims Court. It’s recommended that you send a formal letter before you take this type of action.
Adopting these strategies will definitely maximise your chances of getting paid. It’s an issue that all business owners face at one time or another, but taking the time to put these ideas into place will ensure that you are one step ahead. And by training your clients to pay you on time, you are training them to be better customers to other small business owners too!