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Managing adequate cash flow is imperative for the success of small businesses! A struggle that everyone has gone through is getting your clients to pay you on time.
Late payments can be detrimental to your company, especially when you need the money to come within a specific timeframe.
Thankfully, there are many ways to encourage clients to pay their invoices on time without compromising your relationship!
Use Cloud-Based Payments – Be Flexible!
Everyone has their preferred method of payment – cheque, credit card, online payment system or direct deposit. Opening up your payment options provides clients with every reason to pay you on time.
Today, there are many software programs to help you stay on top of your accounting that provides multiple benefits.
You could use cloud-based software to set alerts to create invoices and send automated reminders to clients 10, 5 and 3 days before they are due. Small businesses that provide an online payment method are almost three times faster to get their invoices paid – whilst other processes take an average of 27 days.
If clients can instantly access a payment link on an invoice, they have the opportunity to make a payment immediately.
Offering small incentives for early payments will build customer loyalty and speed up the process.
Clients are aware that they will need to pay an invoice regardless, so if additional benefits exist in early payments, they will be more incentivised to do so.
Some examples include a 2% discount on the invoice if paid in the first three days, future discounts on products or services and access to additional features.
This will reward clients for paying on time and provide them with further reason to continue returning for the outstanding service.
Setting clear terms from the get-go ensures clients know what they’re getting into at the start of your working relationship.
Make sure the contract outlines all payment related terms such as billing schedule and penalties for late payments.
Don’t be afraid to enforce late fees – remember that a client is not a client if they’re not paying you for your services.
If they do not pay you on time, they must be penalised; otherwise, you are offering credit. Late fees create a sense of urgency and will, in turn, encourage one-time payments to avoid additional amounts.
Remember that nothing beats a contract that a client has agreed to in writing in a worst-case scenario where you have to take legal action.
If you’re invoicing by the project or by the hour, we’d suggest switching to a retainer-based model where a client pays the same amount every month for set services that you offer.
If you’re providing the same service each month, a client won’t need to look over a bill to make sure items are correct.
Instead, to reduce payment delays, you can suggest that the client set up recurring billing. This strategy will simplify the process for both you and the client.
No more filling out invoices for yourself! Remember that the more manual the processes are, the less efficient they will be.
Some clients will avoid your calls knowing that you’re following up invoices they haven’t gotten around to, while others honestly want to pay you but are unable to.
Particularly for small businesses, it could be an unforeseen expense or an error in budgeting that can cause a shortage of funds.
Consider offering a payment plan for clients you know are reliable and have built a strong relationship with over time.
Split payments over the course of a couple of months, or add a small percentage of their overdue bill onto subsequent ones. Find a schedule that works best for them, so they don’t feel like struggling to make ends meet.
In the end, you will develop a loyal relationship with these clients who you know will come back to you for your services.
Human Resources Consulting for Small and Medium Businesses in Adelaide and South Australia. Simple, tailored advice that fits your business.