If you are like many small businesses in Perth you are probably feeling the pressure of cash flow, and finding ways to get paid faster by your clients is on the top of your list. We put together a list of 20 tips put together by our Bookkeepers that are designed to get clients to pay their bills by the due date or even earlier.
- Request an Upfront Payment or Deposit
This is probably best suited for larger projects, but an agreement to pay half the bill at the onset of the project and the other half after completion is a sign of good faith and an indication that you’ll likely get paid at the end of a job. This will not only help by improving cash flow, but it will also “train” the client to pay prior to the work being completed.
- Invoice Your Client as Quickly as Possible
You should send the invoice to your client as soon as the project is finished. This links the completed work and payment together, which has been found to result in immediate payment.
- Offer a Retainer
If the client is providing long-term work, a retainer (.doc) will allow the client to know exactly how much should be paid and when. This helps them manage their budget more effectively, and it may get you paid quicker.
- Stick to a Regular Payment Schedule
If the client expects an invoice from you on the 1st and 15th of each month, then you need to deliver your bill on those dates. Having a regular schedule could be the difference between getting paid and not getting paid.
- Negotiate Clear Payment Terms Upfront
It’s essential to have a written agreement between you and the client that clearly outlines terms, deadlines, fees and other essentials. This allows you and the client to get in synch regarding when invoices are sent and how long they have to pay. You can emphasize these payment terms on each invoice, such as “Due upon receipt” or “Total invoice amount due within 10 business days.”
- Be Polite with Your Invoice Language
While it may seem unimportant, adding lines like “Thank you for your business” and “We appreciate your timely payment” positively reinforces the relationship you have with a client. Be nice, and they just may return the favour by paying on time. In fact, a recent study found that a simple “please” or “thank you” can increase your chances of getting paid by 5%.
- Provide a Small Discount for Early Payment
This can be a percentage of the total invoice amount, which often adds up for clients as a cost advantage. For example, a 2% discount on early payment may entice a client to pay the invoice earlier.
- Penalise Late Payment
To encourage earlier payments, you may want to add a percentage fee for late payments (e.g. a 2% fee to invoices not paid within 15 days). These additional costs for being behind on payment can have a large enough impact on your client’s bottom line to motivate a speedy turnaround.
- Send Payment Reminders at Regular Intervals
Sending friendly reminders up until the due date will help clients remember that the deadline is drawing near or has arrived.
- Review Your Invoice System Weekly
Although it’s easy to get distracted by daily tasks and project work, part of the responsibility in collecting invoice payments is up to you. This means tracking invoices and accounts receivable weekly in order to determine which clients have and have not paid.
- Be Flexible with Payment Type
While some clients want to pay by cheque, credit card or online payment system, others prefer direct deposit. Opening up your payment options gives clients every reason to get you paid on time.
- Keep a Good Rapport with Clients
Dealing with clients means you’re in a business relationship, so focus on developing good communication and understanding each other’s side of the partnership. If, and when payment for an invoice becomes an issue, a healthy relationship can provide a way to work through it and help both parties reach an agreement without fracturing the relationship. Maintaining positive relationships with clients may even prevent issues from ever arising.
- Automate Invoices
Sending invoices in the mail takes too long, runs the risk of getting lost and adds to the expense of billing clients. Automating the process through invoicing solutions and accounting software like MYOB, Quickbooks or Zero gets the invoice in the client’s hands more quickly, saves paper and mail expenses, and keeps your bill at the top of their mind. These automated invoice solutions will also likely have payment reminders and can link to online payment systems.
- Use a Recurring Billing Option in Conjunction with Your Automated Invoice Solution
Make sure the software solution you select sends the invoice out for you and takes the money from your client automatically. This will allow both you and the client to focus on work instead of sending and paying invoices.
- Don’t Waiver on Payment Terms
Unfortunately, human nature takes this flexibility as an excuse to continually be late. Although life happens and you may offer a grace period once, remind the client that payment terms have not changed.
- Reward and Recognise Clients
Give clients a handwritten “Thank You” note or send a quarterly gift to celebrate mutual success. This is not bribing them to pay invoices, but it does grease the payment wheels by letting them know just how much you appreciate their business.
- Renegotiate Payment Terms
The last thing you want to do is lose a client over invoice terms. They may be in the midst of growing or getting another round of funding, yet have a history of paying on time. To show that you understand their changes and to solidify the value you place on the relationship, you can discuss different payment terms for a temporary period of time.
- Don’t Hesitate to Ask for Payment and Regularly Follow Up
You’ve done the work, and now it’s up to you to make sure you get paid.
- Add Cloud-Based Management for Invoicing
Cloud-based management solutions such as MYOB, QuickBooks or Zero allow you to create, edit and send invoices from anywhere. This is ideal for those times where a client may need you to revise an invoice or send them another copy of it to get paid. Even if you are in some exotic locale and get this request, the cloud-based solution provides a way to respond, so there is no delay in payment.
- Hold On to Work Until You Get Paid
Like the penalty tip, negative reinforcement has to be deployed in certain situations. The goal is to highlight that a working relationship involves transactions where work and payment go hand-in-hand.