You’ve done the work. You’ve invoiced the client 60 days ago. You are still waiting to get paid 30 days after payment was due. It’s time to chase for payment!
It’s never easy chasing clients for payment. However, this is business and you are entitled to be paid for the work that you have done. Unless your firm is a bank, you are not in the business of providing credit for your clients. So what should you do?
Manage payment expectations
You should set out your invoicing and payment terms with your clients early on. If you are dealing with a new client, you should consider asking for 50% of the cost before you start doing work for them. Talking about these terms up front with your client will help to avoid any awkward conversations further down the line.
Discounts and interest charges
Some firms offer clients a discount for settling invoices early. You could offer your clients a 5% discount if they pay an invoice within 10 working days. Conversely, you could charge clients 5% interest for payments that are over 60 days late. Make sure you set this out in your payment terms at the very beginning of an interaction with a client.
You should create a standard email that you can send out to clients as a payment reminder. Your email should be firm but not aggressive.
You should set out that payment is due and make it easy for your client to click a link through to an online payments page, should they want to settle their bill immediately. You could even set automated reminder emails that go out to clients 10, 20 and 30 days after the initial invoice date.
Your clients are busy people. Sometimes they forget to process invoices and they might be a bit behind on their admin work.
Sometimes a gentle nudge is all that is needed in order to ensure payment. You need to strike a balance between regular follow up and maintaining a good relationship with your clients, so that they come back to do business with you again in the future. Firm but fair is best.
Don’t forget that online accounting software, such as Xero, connects with your bank account and makes it simple to see what money is coming in, what money is going out, and track the “baddies” with overdue payments! You can also automatically remind customers of payments that are due or are overdue by a certain number of days. If you would like more information about cloud accounting drop us an e-mail at firstname.lastname@example.org