As a business owner, you can agree that the most uncomfortable situation that you’ve gone through is reminding clients about late payments. What’s more challenging is trying to respectfully request the client to pay immediately without the conflict associated with delaying work submissions or adding late charges.
For well-established companies, this is all in a day’s work. However, for small, newly-established business, this can be a nerve-wracking experience. Fortunately, it won’t be as hard once you get the grasp of how to do it effectively without offending or annoying your customers.
According to QuickBooks, to avoid potential conflict between you and your clients, here are the top 10 summarized tips that are designed to get customers to pay their bills by the due date – or even earlier!
Tip #1: Request Deposit or Upfront Payment
This option is best suited for larger projects. However, an agreement to pay half the bill at the onset and the other half after completion is a sign of good faith between you and your client. It’s also an indication that you will likely get paid at the end of every job that you do. This option will not only help improve your cash flow but will also make sure that your clients will pay before the completion of work.
Tip #2: Invoice Your Clients ASAP
Your invoice is one of the most integral parts of making sure you get paid on time. That’s why you need to make sure that you send your invoice to your client as soon as the project is complete. This single document will link both the completed work and the corresponding payment together. Also, sending invoices earlier will result in immediate payment compared, putting it off a couple of days.
Tip #3: Provide a Retainer Document
If your clients are offering long-term work, a retaining document will allow them to know exactly how much they should pay and when. Doing so will help them manage their budget more effectively, as well as making sure you get paid quicker than ever.
Tip #4: Always Have a Regular Payment Schedule
If your clients expect you to send your invoice on the 1st and 15th date of each month, you should make it a point to deliver you bill on said dates. Having a regular schedule is the difference-maker between getting paid on time and not getting paid at all.
Tip #5: Negotiate Clear Payment Terms & Conditions
In every negotiation, it’s always handy to have a written agreement between you and the client that clearly outlines the terms, fees, deadlines, and other essentials. A written agreement will make sure that you and your clients are in sync with invoices like when they are sent and the duration in which the client will have to settle their accounts for a particular period. You can also emphasize these payment terms of each of your invoice. For instance, you can add a line where it says “Due upon receipt” or “Total amount due within 15 business days.”
Tip #6: Always be Polite
Some people think that being polite with your invoice language isn’t important. However, we beg to differ. In fact, we highly think that the tone that you use in constructing your invoice plays a huge role in determining whether you get paid or not. Adding a simple “Thank you for your business” or “We appreciate your timely payment” goes a long way in making sure you get paid on time. So always be mindful of your invoice language. Be polite and show respect to your clients to increase your chances of getting paid.
Tip #7: Provide Small Discounts for Early Payments
It can be the percentage of the total invoice amount, which usually ads up for clients as a cost advantage. For example, a 4% discount on early payment s may entice a client to pay the invoice earlier. No matter the number, everyone loves discounts. So, take advantage of that idea.
Tip #8: Penalize Late Payments
Another way to encourage early payments is by adding a percentage fee for late payments. So, if you offer a 4% discount on early payments, you should also add 4% of the total amount for every late payment. These additional costs for behind payments will have a massive enough impact on your clients’ bottom line, which will motivate them to make a speedy turnaround.
Tip #9: Send Payment Reminders at Regular Intervals
Sometimes, all it takes is just a little reminder. By sending friendly reminders up until the due date, you will help your clients remember that the deadline is near. That way, they can pay you before the due date.
Tip #10: Review Your Invoice System Weekly
There isn’t any perfect invoice system. If there was, every business would be using the same invoicing strategy. That’s why you should always be mindful of certain changes in trends that warrant a change of your invoice system. While it’s easy to get distracted by project work and daily tasks, part of collecting invoice payments is always up to you. Therefore, tracking invoices and accounts receivables weekly is crucial in determining which clients have and have not paid. It will let you know the clients that pay on time, the ones that make late payments.
What if Payment Requests Don’t Work?
If you’ve sent notices about the payment to your clients and still haven’t received payment after a full month, it’s time to step out from sending emails and consider reaching out to them via direct call. At the same time, you should also consider the following factors:
- Your client must have changed their email.
- Your client provided you with the wrong email address.
- You may be sending your invoice payment request to the wrong person or department.
Whatever the reason, it’s always effective to speak directly with the client, person-to-person, then sending an email that you’re uncertain will be opened and read. That’s why you should always make sure that you ask your clients for a contact number during negotiations. That way, you will always have an alternate way of reaching out to them in events of super late payment.
How To Prevent Late Payments
Despite all the payment reminders that you send, there will always be instances of late payments. No matter how polite your emails or how thorough and detailed your explanations are, you will always encounter late payments every now and then. So, how do you prevent it from happening?
We’ve listed down three super simple yet extremely essential tips to help you avoid late payments in the first place:
As the old saying goes, “honesty is the best policy.” When doing business, you need to be true to your every word. So, if you’re concerned about the possibility of overdue payments, let your customers know about it. Gently make them aware of your repayment terms either before or after signing a negotiation agreement. Don’t leave anything to chance, especially when it comes to your invoice. By being honest and upfront, you will make sure that forecasters will read your repayment terms when they receive your invoice.
Be Clear and Concise About Your Time Frame
As mentioned earlier, a business invoice will have a line that says, “due upon receipt” as repayment terms on their invoices. While it may seem simple, it can also be a bit vague. It also leaves too much room for your customers for incorrect interpretation. Instead, indicate your repayment time frame in terms of days (e.g., “Due in 10 days after receipt.”).
Charge Interest on Late Payments
We’ve already mentioned this previously, but we wanted to emphasize on this more to let you know how important it is to get paid on time. Just as you are privy to interest charges on late business credit card payments, you should also hold your clients financially accountable for paying late. Indicate the terms of your interest charges clearly and directly onto your invoice.
So, as you can see, there are many ways you can remind your clients about payments, as well as prevent late payments. All of these strategies are focused on getting you paid on time. That way, you won’t have to worry about late payments or problematic customers who don’t pay at all.
Make your invoicing easier with ReliaBills. Create amazing invoices and automate everything from sending to receiving payment. You can also set ReliaBills for sending overdue payment reminders using the Timeline feature.