Why did you start the business you did? If you are like most of us, you wanted to combine your passion with your job so work could be something that you truly love. But, part of the reason for working is to earn money — and when you work for yourself, you have to worry about collecting payments from your customers. Collecting payments can be well… a little tricky! Sometimes clients don’t pay on time or when you need them to. Here are some tips that we have learned to help collect client payments on time.
Shorter Payment Terms
If you don’t already have payment terms for your services, you should! Payment terms tell your clients how and when they are supposed to pay you. Having shorter payment terms is usually better - we recommend Net 7, and a 50% upfront deposit for projects. It allows you to get your money quicker and therefore allows you to be able to pay your own bills in a quicker time period. It also gives your clients less time to forget that they are supposed to pay you. Sometimes out of sight is out of mind.
Have a Late Payment Fee
So, you set up your payment terms, but how do you reinforce them? A late payment fee. It gives your clients an incentive. Most people don’t want to pay any more money than they have to, so a late payment fee is a great way to ensure that your clients pay you on time. Just make sure that your late payment fee is clearly written out in your payment terms. We recommend a flat fee, or a percentage of the invoice total. It can be as simple as a 10% late penalty per month past due.
Offer Various Methods of Payments
If you want your clients to pay you in a timely manner, make it easy for them to actually make the payment. You can do this by offering multiple methods of payment. You can go the old fashion route like having your clients pay through cash or check, and you can also offer them an electronic ways to pay. Some of the more common electronic payment systems used today include ACH, PayPal, Stripe, and Zelle. Your client will thank you for making it easier for them, and for allowing them to earn those credit card points! ;)
Have Consistent Follow Up Emails
Life gets busy and things get forgotten. Unfortunately, sometimes people forget to pay bills. An easy way to make sure that your clients pay you on time is to remind them through consistent follow-up emails. These emails can be rather simple. Just let them know when their payment is due and how much they owe. If it is getting close to the due date, send them an email that gently reminds them of the late payment fee.
Collect that Money!
By following these simple tips, getting paid by your clients on time will be a lot easier. Which in turn, will make it easier to pay your own bills and keep your business cash flow on track. If you have any other questions related to your business that you think we could help with, don’t hesitate to reach out to us through our contact page!