You provide an excellent product or service and are a subject matter expert in your profession but getting clients to pay their invoices on time is likely to be one of your most challenging pain points.
From setting up the rights terms from the outset, to offering flexible ways to pay, and gentle encouragement further down the track, the following tips can help ensure your business cash flow stays on track.
Be upfront about payment terms from the outset
Setting expectations to a client before you deliver the product or service is a wise move. Not only does it ensure that your client doesn’t receive any surprises at the end, but it also allows you to embark on a relationship based on openness and trust. Ensure that you answer any questions your client may have quickly and with transparency, and you’ll be starting off a commercial relationship on the right foot.
Look at deposit or instalment options
An effective method of ensuring you are getting regular cash flow and that your clients have a way of spreading out their payments, is to request an upfront deposit, with payment in instalments. This could be a 30% or 50% deposit once the terms of the arrangement are agreed to, with the remainder upon completion or delivery. As well as benefiting your cash flow, it can also help your clients who are able to space out their payments.
Communicate, communicate, communicate
As all business owners know, the river of business can be a rough journey, and things can change at any point. If a product or service is delayed or there are unexpected cost hikes, make sure you keep the lines of communication open with your clients, and give them a chance to get their finances to be able to meet unexpected or higher costs.
Invoice upon delivery or completion of a service
While your fantastic product or impeccable service is front of mind for your client, make sure the invoice is sent at the same time. Not only does it keep your paperwork up to date, the sooner you invoice, the sooner you can get paid. It can also mean that your invoice is further up in the payment queue, so you are a higher debt priority for your customer.
Don’t delay in contacting debtors
No one likes following up on late invoices or unpaid debts, but it is a necessary part of business. Create yourself a set plan of how and when to approach debts. For example, the day after an invoice is due, you may want to get a reminder sent from your accounting software or a personal email note. If the invoice hasn’t been paid a week later, you may progress to a phone call. It’s also wise to have a deadline for when you will seek debt collection support from a professional.
Have a provision for late fees in your terms
This can be a great tool in your debt collection kit, as if you have a provision in your terms for late fees, if a client has competing priority bill payments, they are likely to prioritise yours, to avoid the extra cost of a late fee. If you do implement this, make sure it is well communicated in your terms, together with the percentages or fee charged, and the timing when this will kick in. It is also worth noting again on your invoices so that the client is reminded of this with each invoice or reminder. And when the late fee does kick in, give your client a call to let them know, you could even waive the late fee if the full invoice is paid that day.
Flexible goes a long way
If your customer is having real problems with cash flow of their own, demonstrating flexibility, while getting part payment of your invoice at the same time, is a smart move. Work with your client to agree a way forward and what they can afford. This should be set out in writing, with dates and amounts specified.
Keeping money flowing into your business needs rules of engagement, communication and sometimes follow up conversations with your clients. If you are upfront about your terms, engage in flexibility where warranted and are professional in your dealings with your clients, you have set yourself up well to get your invoices paid without needing to enlist a debt collection agency.
Every day we’re faced with urban myths about politics and celebrities, and on a less scandalous scale, myths around managing our finances. While the world of celebrities doesn’t have much impact on our daily lives, nothing is more personal to us than business cash flow.