In any business that involves providing services and goods for money, getting paid and on time is as important as delivering a timely and quality service (or goods). After all, your business thrives on these funds and you need them for paying your staff, suppliers, vendors, taxes, and so on.
However, you’ll often encounter situations in which your customers are late in their payments and you need to figure out how to get your well-deserved money. To help you in this endeavor, we offer you some tips you could apply to make the whole process a tad more convenient:
1. Establish payment terms
It’s of immense importance that your clients are aware of any and all payment terms and conditions before you even begin conducting the business. These may include a deadline under which you expect them to pay (for example immediately or within 45 days), as well as a slight nudge in the form of discounts for early payments or penalties for delays.
These work well with different types of clients – those who may be encouraged to pay early and those who need a stricter approach to avoid paying late fees. Early discount of, say, two percent won’t damage your business but will get you your payment ahead of time. Likewise, late fees (let’s say seven percent) will help you cover any of your own expenses that might’ve piled up during the payment delay. See an example of how to write your payment terms in our invoice templates.
2. Stick to the procedures
It’s easy to jump to the conclusion that your client has skipped out on the bill, but don’t do anything rash, like making angry calls or passive-aggressive emails. This isn’t just poor business practice but might cost you your client and even your reputation if you’re proven wrong.
Instead, check first if you’ve done everything on your side by the book. This means verifying:
- if you issued the invoice to the right client (or even at all),
- if you expressed the payment terms clearly,
- the exact amount of money the client owes you,
- if you clearly listed your address and payment details.
3. Be polite and friendly about it
Once you’ve made sure you followed the procedure to the T, consider why the client may haven’t got around to paying your invoice. Maybe they’re hospitalized or had a family emergency? Went on a vacation? There are many situations in which your invoice simply wasn’t a priority for them at the moment.
In this case, it’s prudent to just send a polite and laid-back “Hiya, just checking in” or “Do you need help paying” message to check up on your client, without sounding presumptuous or angry. This will let you know if the missing payment was an honest mistake on their part and you won’t sound like you’re accusing them of anything.
4. Take it up a notch
The checking-in email didn’t work? It’s time to try again, but this time with a slight change in tone. Now you need to sound a bit more strict and appeal to common decency.
Therefore, you should begin by expressing your disappointment over still not receiving what you’re owed. Continue with remarking how you’ve enjoyed doing business with the client. Finish with an expectation to be paid within the period of your choosing, otherwise, you won’t be as open to cooperation in the future.
That said, do note that this approach, while effective, will probably end your cooperation with the client. Before using it, you need to ask yourself is this client worth the future headache over unreasonably late payments (if they ever pay you) or are you willing to put up with it because they’re ultimately good for it.
If they’re not responding to emails, then try getting them on the phone. Ask them politely if they are alright and have any problems sending you the payment. The advantage of calling them is that they’ll be pressured to give you a quick answer right there and then or just hang up, which is still an answer in itself.
5. Go through the proper channels
Still no response after multiple emails, calls, and a very reasonable deadline, even by the most relaxed standards (say, three months or so)? It’s time to take it to the higher authorities. You might not get the entire amount owed, but at least you’ll get something.
Closely examine your contract and contact an arbitration board for help. You can also turn to a business mediation service to figure out a payment plan if your client has simply run into a rough patch and can’t afford to pay at the moment. Another option is to reach out to a business reporting bureau and turn the complaint into a public record, threatening your client’s reputation and, as a result, increasing your chances to get your payment.
You could also take the client to a small claims court where you’ll be able get some of your money (minus the court fees) without even hiring a lawyer if the claim fits the specific financial range. If it’s above that range, then it warrants a regular court lawsuit with a lawyer’s assistance.
6. Charge in advance
If you don’t want to do all the heavy lifting of repeatedly reminding your client to pay you and chasing them to courts if they don’t, you should do whatever is in your power to prevent such situations. You can ask them to pay upfront or at least pay a certain percentage in advance as collateral if you don’t feel comfortable asking for the full amount.
You could also make it your policy to charge only the new clients this way (at first) and invoice post-work after you have built rapport with each other. Make sure to state these conditions in your payment terms, so the clients are fully aware of them.
7. Move on
If all the steps to collect your payment fail (and you haven’t charged in advance) or you don’t have the time or energy to pursue further, you have no other choice but to simply count your losses and go back to your life. At a certain point, you have to stop and consider whether it’s even worth it.
If you can’t, then the last resort option may be to simply get someone else to fight this figurative battle for you, like a collection agency, and hope for the best. They will charge a percentage of the claim when and if they succeed. This will allow you to dedicate your attention to where it’s really needed – doing a great job.
Stay on top of all your invoices and payments
Be it for honest or malicious reasons, sometimes your invoices will slip through the cracks and your payment requests will fall on deaf ears. It’s just the way it is when you’re working with clients, invoices, and payments. This is why you have to be on top of all these at all times.
However, you don’t have to keep track of all the clients, reminders, paid, pending, or unpaid invoices on your own. You also shouldn’t have to single-handedly contact each and every client that might be late on their payments.
So why torture yourself when a top business management platform can not only help you organize and stay abreast of all your invoices, but also automatically send payment reminders to your clients, via email or SMS? This is exactly what we’re here for (and so much more), so sign up for a free trial today and see how we can make your life and work easier!