7 Strategies to Get Invoices Paid On Time
Billing, invoicing, and chasing payments. Your small business runs because your clients pay the invoices you send. But what happens when they don’t pay?
Small business owners often have strong one-on-one relationships with their clients. When a beloved client is late with payment, that relationship can turn sour. While billing is not the most fun part of your business, not managing it properly can lead to serious problems. Instead of chasing payments, try these approaches to get clients to pay on time:
1. Watch for “red flag” clients. Clients less likely to pay on time may show signs during your initial talks with them. While not everyone who is disorganized or laser-focused on price is going to be a slow pay, those are two signs to watch. Consider whether you want to take on a client if you get a bad feeling.
2. Use a contract. Make sure your contract has specific information about when and how much you will be paid. When someone signs his or her name, they are more likely to stick to that agreement. Make sure your late payment terms are spelled out in the contract and in every single invoice.
3. Offer an incentive. Instead of charging a late fee, consider rewarding clients who pay early or in advance with a discount on their next invoice.
4. Make it easy. These days, even the smallest business owner can accept electronic payments with ease. Be sure your business accepts as many forms of payment as possible.
5. Charge a deposit. With new clients, or in the early days of your business, it’s not a bad idea to charge something up front so you have some of the money right away. Then your cash flow won’t completely break down if they are late with payment.
6. Invoice regularly. If you don’t work on a retainer, be sure invoices come at regular intervals or at specific project milestones that are explained in advance. If a client knows the bill is coming, he or she will know when to prepare payment. Try using an automated invoicing program to help manage this task.
7. Stop work if payment is late. Although we all want to give people the benefit of the doubt, you must stop working if payments become too far overdue. A few days is one thing, but if a payment is weeks late, it’s time to quit. One small business owner continued working for three months without payment. While he thought he was being nice, it affected his business and, in the end, he never got paid for that work. Remember, your time is money and it’s too valuable to waste working for someone who won’t pay.
Outsource Business Billing
Although these strategies might improve things, small business owners often face another billing challenge: finding the time to create and send invoices. Time is the No. 1 reason small business owners outsource the task of billing and chasing late payments.
Billing and invoicing may seem like an “easy” task, but if your small business is struggling with late payments or just too busy to get invoicing done in a timely fashion, contact us for help.