You talked to your customer almost every day while working on their project. Now that you’ve sent them an invoice, they haven’t paid you and won’t answer the phone. Not getting paid on time is one of the biggest challenges you’ll face as a small business owner, and it could cause some serious cash flow problems.
It can be frustrating to have to wait to get paid or to have to remind clients over and over again that they still owe you money. But, there are steps you can take to get paid on time more often.
Discuss Expectations Up Front
No one likes surprises, especially when those surprises involve money.
Before beginning a project for a client, discuss all expectations – when you’ll have deliverables to them, when you’ll invoice them, and when you expect payment. After the initial conversation, send them an estimate so they know exactly what to expect.
Putting in a little extra up front can save you a lot of headaches later.
You might have given your client an estimate up front, but now you’re halfway through the project and have realized that it’s going to take more materials or time than you originally expected. Don’t just assume your client is going to be okay with the price increase. Let them know immediately about the changes so they aren’t blindsided later.
Talk to your client throughout the project so that they aren’t surprised when they get the final invoice. When anything changes, particularly if it changes the cost of the project, ask your client to sign a new estimate. It will be harder for them to argue their final invoice if they’ve signed off on price changes during the project.
Ask If They Need an W-9
Some companies require you to send them a W-9 before they can pay you. Instead of waiting to see if they need one, ask them before you send an invoice. By being proactive, you’ll get paid faster.
Send Invoices Quickly
After you’ve finished a project for a client, send an invoice as soon as possible. The sooner you send an invoice, the sooner you’ll get paid.
Offer Multiple Payment Methods
You might prefer that your clients pay you by check because you don’t want to pay the fees associated with accepting credit cards, but you have a client who hates writing checks.
Your clients are more likely to pay you on time if they can pay using their preferred method. By offering multiple payment methods (for example, check, cash, or credit card), it will be easier for your clients to pay you.
Remember that if it sounds too good to be true, it probably is.
Be skeptical when you’re working with a new client, especially if they ask for a high-value item to be rushed or if they want you to pay their subcontractor for them. Be particularly skeptical if all communication is done online, without ever meeting the client face-to-face.
Ask questions to try to get to know the client better and research them before you agree to work with them. It’s better to get to know them up front than getting stuck with an unpaid invoice later.
Make Invoices Easy to Understand
When you’re creating your invoices, make sure that they’re easy to understand and try to avoid industry jargon. For example, say, “due within 30 days,” instead of “net 30.”
You’ll eliminate a lot of confusion this way.
Itemize Your Invoices
On every invoice you send out, make sure to put an itemized breakdown of every product and/or service included on that particular invoice. Your client will be able to see exactly what they’re paying for, which will eliminate a lot of concerns.
If you client has missed their due date, don’t start threatening them.
Before you start calling them, make sure everything is correct on your end. Make sure you’ve actually sent the invoice, made the payment terms clear, made it clear how much was due, and sent the invoice to the right person.
If you’ve done everything correctly, give your client a call or send them an email to check in with them. The invoice may have just slipped their mind and a friendly reminder is all they need to pay you.
Have a Reminder Policies
Don’t just assume that every client is going to remember when they need to pay you. Instead, set up a reminder policy to follow up with clients who missed their due date.
For example, if a payment is due within 30 days, remind your client at the 45-day mark and again the following week. The older the debt is, the harder it will be for you to collect, so remind your clients regularly.
Don’t Go Straight to Collections
If an invoice is over 90 days past due, you might think that turning it over to collections is the only way you’ll get paid. If you go to collections, however, you’ll only get a fraction of what you’re owed, so send invoices to collections as a last resort.
Before turning the debt over to collections, try one of these methods, first:
If your client is a company and your contact won’t return your calls, try talking to someone else, instead. You might be able to talk directly with the accounting manager and get paid without any problems.
If your client wants to pay you but is having cash flow problems, consider setting up a short 3 to 6-month payment plan for them.
Find out your state’s maximum for small claims court (usually between $2,500 and $15,000). If the amount you’re owed is less than the maximum, take your client to small claims court. You can represent yourself in court, instead of hiring an attorney.
If you’re owed more than the maximum allowed by small claims court, hire an attorney and file a lawsuit against your client.
Offer Discounts & Charge Penalties
Consider offering a discount to anyone who pays their invoice before the due date. For example, you could offer a 1% or 2% discount if the total invoice is paid in full within 10 days.
Not everyone will be motivated by a discount, but they might be motivated by the fear of incurring a penalty fee. Consider charging a penalty on any invoices paid 10 or more days past the due date.