When you work as an employee, getting paid is a no-brainer. You sign some forms when you join the company, and your salary comes on a regular basis. But once you leave the comfort of the corporate world and strike out on your own, getting paid becomes your responsibility. Not all clients are quick to pay: some are forgetful, some want to hold onto their cash for as long as possible and others are just difficult.
Getting paid in a timely fashion has to be one of your top priorities. You need to draw a salary so you can pay your bills. You need a cash flow in the business so you can keep it running and even expand it. Piles of unpaid invoices are damaging to you personally and to the success of your venture.
Follow these strategies to get paid more quickly and make billing less of a headache:
Make clients sign a contract before starting work. A contract which states clearly what work you will be doing and how much you will be paid provides fewer avenues for excuses and arguments later on. And if you have to take legal action to get paid, a written contract is super useful.
Offer a discount to those who pay early. Add a small amount to the contractual price and then offer a percentage off to clients who pay early or on the day payment is due. The opportunity to save some money is the strongest incentive to settle the bill!
Collect some payments upfront. Some payments, such as travel expenses, that you would otherwise have to pay out of pocket, can be collected before work begins. And charging a hefty deposit before you begin the project ensures that at least a portion of the payment is paid on time.
Don’t charge a late fee. This tactic won’t work, since it will antagonize the client but won’t lead him to pay up earlier. He will either ignore it or take the fact that you mentioned it as an invitation to pay late.
Send invoices on time. If you want clients to get the message that you care about being paid, you need to send your invoice right away. Include a line that says, “Please pay within x number of days” and let them know what date that is. Research shows that invoices which include these words are paid more quickly.
Visit the client. Make a housecall to the client if your phone calls and emails have been ignored. Find out why payment has been delayed and if there is a financial problem, help the client figure out how he can settle up with a payment plan. If there is no particular reason you haven’t been paid, politely and firmly ask for immediate payment and offer easy and immediate payment options.
Send an invoice with certified mail. This will make it clear to your client that you won’t tolerate any more delays. In extreme situations, include a threatening lawyer’s letter demanding immediate payment. Don’t do this without seriously weighing the pros and cons of this move, though. You are likely to lose this client’s business and he may tell colleagues that he was ill-used.
Stop working. If the project is not finished and a payment is significantly delayed, stop working until you get your cash. If the client doesn’t want to be left in the lurch, he will quickly reach into his wallet and pay what is owed.
Change your billing method. Talk to the client’s CEO or bookkeeper to find out how you can bill them more effectively. They might suggest sending the invoice at a different time of the month, sending it via email instead of snail mail or following up with a phone call. Consider asking chronic late payers to provide you with post-dated checks for the next 6 months.
Find new clients. One late payment is no reason to dump a client, but consistently late payments are a good reason to find other, more reliable clients.