As a solo-preneur, consultant or other professional, you depend on your clients to pay you on time. A late-paying client may mean that you don’t have the money to pay your contractors and vendors or make the mortgage payment. Here are some tips to make sure you get paid on time.
Bill Promptly for What You Are Owed
Many professionals are lax about billing. Maybe asking for money makes them uncomfortable, or maybe they just hate dealing with bookkeeping and accounting. But you won’t get paid if you don’t bill. If you are not billing your clients in a timely way, or letting some billable hours go because you don’t want to bother with invoicing, you need to change how you do business. Consider hiring a virtual assistant who can generate invoices for you. Getting paid for all of your time and getting paid faster will justify the expense.
Bill as You Go
Do you get a deposit upfront, then charge the rest after completion? Instead, get your deposit then bill as benchmarks are met, especially on large projects. If there is any problem collecting, you can stop working on the project until payment is made, minimizing the risk that you will put in a lot of uncompensated time on a project.
Provide Incentives for Early Payment
Give a small discount for paying quickly. Perhaps you have seen invoices with terms such as “3%/7, net 30.” That means that if the client pays within 7 days there is a 3% discount. If they pay on the due date the entire amount is due. People love saving money, so many will pay faster to save the money. If you think you can’t afford to give even a small discount, consider how much it costs in time, money and aggravation to have to chase after what you are owed.
Charge a Late Fee
On the opposite end of giving an incentive for early payment is charging a fee for late payment. Unless your contract states some other terms, you might charge 1.5% per billing period for payments made more than 30 days after billing. Make it known that you will charge a late fee (put it on your invoice and in your contracts) and charge it when clients pay late. Don’t be timid about charging late-paying clients. Is Visa shy about charging you if you pay late?
Offer Payment Options
Some contractors only accept checks and do not take PayPal or credit cards because of the fees. The couple of percent you give to the card processor or PayPal is worthwhile when you get your money faster. If someone has to write and mail a check, it will take them longer than if they can just click on a link and pay online, or hand you a credit card to swipe. It also takes away some excuses for non-payment. PayPal is a good choice to accept online payments, and Square is my favorite for taking credit cards offline.
Charge in Advance
If non-payment is becoming a problem, start charging the entire fee in advance. Another way to do this is to pre-sell a number of hours or collect a retainer. For example, clients may buy blocks of 20 hours of service at a set price, then use them as they need them. Or, they may pay a flat rate for up to 10 hours of service a month. This works well for virtual assistants, web designers, content producers and other professionals who do a lot of repeat work, sometimes in small time increments, for their clients.
When someone doesn’t pay you, don’t let it go. Contact them as soon as the payment is past due due and ask for payment. Let them know when the late fee kicks in. If you are doing work for them, tell them that stops until you receive payment for services already rendered.
It may be uncomfortable to confront someone when they have not paid you on time, but it’s an essential part of business. If you are too uncomfortable to do it yourself, consider hiring a virtual assistant at evergreenfunders.com to do it for you.
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To sum up: Bill for everything you are owed. Bill promptly. Give customers multiple ways to pay. Know when payments are due and follow up. Give discounts for prompt payment and charge for late payments. Don’t keep working for clients that don’t pay you, or that don’t pay you on time. You deserve better.
Want to know more about improving your cash flow? Small Business Cash Flow: Strategies for Making Your Business a Financial Success is a fantastic resource by small biz expert Denise O’Berry.