16 May, 2017
Get paid sooner – Your business depends on it!
If cashflow is the lifeblood of your business then getting paid consistently on time must be one of your top priorities. For many small businesses it can take just one large client that pays late to put them in a very difficult situation, at worst affecting their ability to pay staff and keep supplying their other clients. If you hit the tipping point, it’s a pretty quick downward spiral, so here are some ideas to help you have the best chance of getting paid on time.
A quick note, if money is important to you and you’re based in London – please consider our cheap virtual office. Rent a high quality business address in central London from £15 per month.
1. Be professional from the start
You may only be a freelancer or very early stage with a team of two. That doesn’t mean you need to represent yourself in an unprofessional or “little fish” way. If you go to a meeting that requires a suit, you’ll wear one and you’ll do what’s necessary to be on time and be professional. In the same way you need to present yourself in a credible fashion across the whole of your business and give the impression that you take money and your client agreements seriously.
Handwritten, unnumbered invoices are a big no! Use one of the many online accounting packages that make it extremely easy to manage your cash flow and specifically produce clear, simple and professional invoices that can be emailed out. You will create a professional appearance and can set automatic reminders if a payment isn’t received on time.
Here are three suggestions for online invoicing and accounting software.
2. Get a contracted agreement in place first
Don’t start work until your agreement is clear and in place. What outcomes are you committing to and in what time frame? What payment terms are you committing to? Are you requesting 50% in advance? Then make sure that the initial invoice is sent out in time for payment and work to begin as scheduled. But don’t get started before payment is made (this will show that you are serious about all aspects of the agreement you have in place).
You must also consider within your agreement what the terms are for unexpected cancellation of a project. The fact that a client decides they no longer need something doesn’t mean you haven’t spent time and resources on scoping and preparing for a project. If staff have done work and materials purchased you musn’t be out of pocket.
3. Keep your payment terms short
The simplest way to get paid sooner rather than later is to set short payment terms. Don’t wait for a client to suggest what the terms are, we would suggest considering all invoices are “payment on presentation” unless a particular client disagrees. Some large corporations may require up to 60-90 day terms but unless that is the only thing they will agree to we suggest keeping your terms short. And once an invoice is due make sure it is sent on time. Any late presentation of an invoice immediately tells your client you don’t mind payment being late.
4. Take electronic payment
If you’re of a certain age, you’ve almost certainly heard the excuse, “I put the cheque in the post weeks ago (honest). It must have got lost, I’ll send you another one today.” In fact you may even be embarrassed to admit you’ve used that one yourself!
These days the facility for taking electronic payment by card or BACS is so simple there’s no excuse not to make that your primary way of accepting payment. If you are invoicing from within your own accounting software, just add your bank details with a note on how to make payment to the bottom of your invoice template. Then you never have to write it again.
If you’re selling a service with a fixed recurring monthly fee, consider using something like chargebee to handle the payment processing. Or if a client says “I can only pay by card”, don’t let them get out of it by not accepting that. With packages like Wave, you can even set up to accept card payment with a link right on the bottom of your invoice. And it’s definitely preferable to get a payment right away and bear the additional couple of percent for processing, than to end up waiting months or not get paid at all for not accepting card payments.
Other services for this kind of payment processing include, GoCardless, PayPal and Stripe.
5. Keep chasing the debtors
It’s easy to think that a non paying client might decide never to pay and in rare cases this may be true. But for many, they are going through a similar cash flow experience to you. At some point they will most likely have the money to pay you, so it’s really important to stay top of their mind. In fact, it’s likely they have a list of people they owe money to each month. As hard as it may be to stomach they will create a mental hierarchy of people who they need to pay. Your position on that list will be based on two things. The perceived importance of the service your provide to them (and how easy it is for you to take it away) and whether you are on their mind. The former will often influence the later.
But staying on their mind can be simple with an online accounting/invoicing package. Just set automated reminders at regular intervals and make use of templates to create increasing levels of demand based on how far beyond due they may be. You could also follow up in the early stages by phone to build a feeling of personal responsibility in the client.
Your perceived importance is a little trickier. If you built their ecommerce website and can potentially switch it off for non payment then they will think very hard before risking non payment. However, if you did the logo design and it’s already on their website, there’s no way for you to take that logo back. Now you’ll need to decide how litigious you want to get. But that’s for another article…
Hand-picked related articles
Our meeting rooms are located at our Paul Street office,
and it’s just a few minutes walk from Old Street tube station…
3rd Floor, 86-90 Paul Street,London,EC2A 4NEDirections
Monday - Friday 9am - 18.00pm