When clients don’t pay on time, it’s a big headache that threatens both your sanity and your bottom line. Here are a few pro tips that should help you avoid chronically late payers.
Set a strict policy (and perhaps sign a contract)
Before working with clients, confirm that they’re very clear on your payment terms. But make sure your terms are reasonable. A 30-day payment window is pretty standard. If you have a longer-term commitment or big project/service, consider requesting a retainer or some kind of upfront payment.
Some businesses even require full payment up front. If that sounds too demanding for your business, outline your policies in a written contract that both parties sign off on before any work begins. Note that if you’re working with a larger corporation, it may have longer (like 90- to 120-day) pay cycles. It’s important to factor that into your bookkeeping and accounting so you’re not stuck with cash flow issues. Remember, before sending out any sort of contract, be sure to consult with a lawyer to make sure everything is buttoned up and by the book.
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Include penalties for late payment
In your policy, outline how you handle late payments — like service charges clients may incur at set intervals of delay. Check regulations, which vary by state (like what is legally permissible to charge), but generally you charge a percentage of the total due. You may also want to include language about the suspension of work if payment is continually delayed.
Offer discounts for early birds
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 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 each invoice. Implementing an online invoicing system like Square Invoices makes this all a whole lot easier. With mobile invoicing, you’ll be able to quickly email invoices (from a template) via your mobile device, which significantly cuts 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 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. As long as you’ve been professional about the whole thing, you shouldn’t have any regrets.