It's no secret that if you want to stay in business, you have to get paid for the work you do. Not just get paid. You have to get paid on time. If you can't pay the bills, your vendors, or yourself and make a profit after all your expenses are paid, then you can't expect to stay in business for very long. So how do you make sure to keep the cash flow moving? By applying a few simple strategies today, you can stop chasing down those delinquent clients and start focusing on growing your business.
We've been implementing these strategies in my business for years, and we generally do not have problems with clients paying late. The ones that continue to pay late after we've made sure to follow through with these 5 strategies do not remain clients. It's pretty simple, and it's totally not personal. It's business. I don't know about you, but I think we all wear enough hats in our businesses that adding "Collections Agent" is not a position we want to add to our resumes anytime soon.
Here are my Top 5 Ways to Ensure Your Clients Pay on Time
1. Say it up front.
Make sure that your payment terms are in your proposal/quote AND in your contract underneath the total amount your client will be expected to pay. If you want to ensure payment within 30 days (NET 30) for example, then specify that the client's payment is due NET 30 once they receive the final deliverables and invoice from you. If your client signs on the dotted line, they have accepted your payment terms.
Tip: Let your client know in the contract exactly how they can pay you. Do you accept credit cards payments, PayPal or checks? If you want a check, let them know where to send it. Another form of payment? Let them know! Here's an example of how we spell out our payment terms in my business.
2. Use a smart invoicing system.
What do I mean by smart? I'm talking about an invoicing system that allows you to receive payment once the client clicks on a link in the invoice you sent. Often, you can find one that connects to QuickBooks or another accounting software as well. And if you really want to use a smart system, I highly recommend using a service like HoneyBook. In fact, the screenshot above is directly from our HoneyBook system that we use with all our clients. Clients can pay by clicking on a link, and you can actually see when they viewed your invoice. No more wondering if they even received it! In my business, we have it set up to send clients a 3-day reminder before payment is due. This system has worked beautifully for my company, and as it turns out, many of our clients are actually paying as soon as they sign the contract. What more can you ask for?
3. Enforce late fees.
This might sound a little harsh, but when it comes to getting paid on time and whether or not you can pay your bills, you better mean business. No pun intended.
What kind of late fee should you charge and how do you enforce it? In my business, we charge a percentage of the overall project cost for every 5 days the payment is overdue, and I can tell you that for all the years I've been in business, very few clients pay late!
Make sure the late fee is spelled out on the proposal/contract. Again, scroll back to the screenshot and see exactly how we let clients know about late fees. Reiterate the late fee on the invoice once you deliver. If worse comes to worst and your client's payment is late, contact them and say, "We see that your payment is overdue and we'd like to avoid having to charge the late fee. So, if you can let us know it's on its way this week, we will be happy to waive the fee this time." You'd be surprised how quickly people pay up!
4. Deliver your final invoice with the deliverables (or before).
Once you wrap up a client's project and you are ready to deliver, make sure you include the invoice with the full package. Don't wait! If you wait, they may forget about the project or leave your invoice sitting in their inbox unpaid. After all, the most important thing to them is the actual deliverable. So, anything extra you send later may not get handled if they are wrapped up in other projects.
If you are in an industry that frequently expects clients to put down a deposit or a retainer, then attach the final invoice with the deliverables to remind them of their balance or request the balance before the final files are delivered. A friend of mine who is a graphic designer does not release the final downloadable files she creates until the client has paid their balance. Decide what's best for you and your business, and be consistent!
5. Get to know your clients' AP department.
Oftentimes your client's contact person is not the same person who signs checks or swipes the credit card to pay invoices. So, when you're setting up the project or service, ask your client if there is someone in their Accounts Payable (AP) department you should copy when you deliver the final invoice. Many times they will tell you, "No, I'll take care of sending it on for payment." This is fine... as long as they actually do.
And if they don't? Some people simply forget to forward an invoice because they receive the deliverables and move on to their next task. If your client becomes unresponsive about an overdue payment, put in a quick and friendly call to their main business number and ask to speak to someone in AP. You'll often find these people to be very responsive, as they want to avoid paying a late fee. This also gives you a chance to get their contact information for the next time you send an invoice to the same client.
Decide which of these items you can do today and which might take a little longer to get in place. Make a plan to knock out these 5 items within the next 30 days and you'll see your payments coming in even before they're due!
- Add some verbiage to your contract and invoice templates with your payment terms. Tip: make them bold.
- Sign up for what I call a smart invoicing system. Again, I could not recommend HoneyBook more. Use this code for 50% off! (Please note that I may receive a small affiliate fee if you sign up for HoneyBook using my link. However, I cannot recommend HoneyBook enough. We use it daily in my business!)
- Decide on the terms of a late fee and add it to your contract and invoice templates near the payment terms.
- Add attaching your invoice with your final deliverables to your workflow.
- Create some "cut and paste" verbiage to start adding to your emails for when you set up a project and request information on who to copy in your client's AP department when delivering the final invoice.