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How to Handle Clients Who Never Pay on Time

When clients are chronically late to send payments, it can threaten both your sanity and your bottom line. Here are a few pro tips that should help you get paid on time.

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Set a strict policy (and consider writing up a contract).

Before working with clients, let them know your payment terms. But also make sure those terms are reasonable. A 30-day payment window is pretty standard. If you’re working with a corporation, it could take as long as 120 days. Consider requesting a retainer or some kind of up-front payment if you have a longer-term commitment or big project/service. And remember to factor the time between payment into your bookkeeping so you’re not stuck with cash flow issues.

No matter what kind of payment policy you have, it’s usually a good idea to outline it in a written contract that both parties sign off on before any work begins. Before sending it out, remember to consult with a lawyer to make sure everything is buttoned up and by the book.

Penalize late payment.

In your policy, outline how you handle late payments — like service charges clients may incur at set intervals of delay. You should check regulations about what is legally permissible to charge, but it’s generally a percentage of the total due. You may also want to include language about the suspension of work if payment is continually delayed.

Offer an early bird discount.

If your business is in a position to do so, you might think about offering a discount — like 10 percent off — for early payment to persuade partners to settle up quickly. It’s less money, yes, but the quicker infusion of cash and the time you save chasing down late invoices may be worth it.

Automate your invoicing system.

Staying on top of invoices is time consuming, especially when you’re running your own business. It’s easy to lose track of whether or not you’ve billed someone, not to mention the status of every invoice. Using an online system like Square Invoices makes this all a whole lot easier. You’re able to create, send and even schedule invoices quickly on your desktop computer or mobile device, and significantly cut down on back-office computer time. You can also keep track of everything in one centralized place, so you know which invoices are outstanding and which ones have been paid.

Know when to cut ties.

At some point, enough is enough. If a client is habitually delinquent despite your best efforts to reiterate your policies, strongly consider putting the kibosh on your business relationship. Even if it’s a huge client, it might not be worth it.

Remember, this post is for educational purposes only, and Square does not accept responsibility for the accuracy of any legal information presented in this article. For specific legal advice related to your business, consult with a lawyer.