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5 Tips to Get Clients to Pay on Time

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We are generally industry agnostic when it comes to the clients we serve, but we count a significant portion of our clients from the professional services industry. As such, we have developed deep understandings of specific concerns that those in the professional services industry experience frequently, such as the payment cycles of clients. From late paying to non-paying, we know that getting clients to pay bills is a particular pain point in the services industry.

For example, you get to the end of a project, send the invoice, and you wait. Weeks pass, and you still don't have anything to show for your work. Late client payments do more than throw off your company's accounting — they could also cause major stability problems for your business. Entrepreneur reports 82 percent of small and startup business failures result from issues with cash-flow management. Use these five tips to get your invoices handled on time.

Establish Exact Payment Terms

Sometimes your clients make the wrong assumption about payment terms. They may think you operate on a net 30 basis or require payment on specific days, such as the 1st and 15th of the month.

Add a contract section explaining payment methods, due dates and other relevant details. When you're working this form out with your clients, find out whether they require a specific invoice format or use an in-house system for submission.

Reward Early and On-Time Payment

Give your customers a reason to pay close attention to your invoices by providing a discount for early and prompt payments. This financial incentive takes an encouraging approach towards your clients, rather than punishing them for being late. While you do want to put an interest rate in place for missed billing deadlines, emphasize the positive option first. Your business can offer a set discount percentage, such as 5 percent, for any early payment. Another option is to use a sliding discount scale, which starts from a high discount and slowly goes down as you approach the invoice due date.
CFO.com reports many companies use longer payment terms as their go-to option to manage their own cash flow, which puts your business in a difficult situation and may result in long-term delinquencies. Add a substantial interest fee to make companies think twice about ignoring their accounts billable. Sometimes even this disincentive isn't enough to get your payment. Be prepared to use a collections company or go to court to get a judgment.
 

Offer a Recurring Payment Option

Are you working on a long-term basis with the clients? Use a recurring payment option so you both can focus on the project rather than worrying about billing dates. If you offer the same services each month, you have an easy time getting this setup.

You may run into some difficulties if you have varying payments each month. Your clients may not mind an automatic payment going out for these expenses without manually reviewing it. If they do, set a base amount for the recurring invoice and show the clients any additional costs before you add them on.

Automate Your Invoice Process

Sometimes you don't get paid because you forgot to send out your invoices. Use a system to automatically send the bill once you complete the project or ship out products. You can schedule in payment reminder emails so you don't have to chase around perpetually late-paying companies. Outsourced accounting and bookkeeping services are another valuable option for staying on top of your accounts payable and receivables.

Add Payment Links Directly in the Invoice

Clients might intend on paying immediately, but they need to open up another program or browser tab, log in to their accounts and then send money. They may get pulled away from the computer and have their session time out before they get back. The clients don't want to repeat all the steps, so they leave it until the next day. This scenario plays out a few more times while you get frustrated at the lack of action on their end.

If your invoicing system supports it, integrate payment links or buttons directly in your invoice. Your clients are a click away from paying you for a job well done, which reduces the chances of any distraction stopping them from the task at hand. The easier you can make this process, the better.

In a perfect world, invoices get paid as soon as they land on a client's desk. In reality, you could use a helping hand to keep your cash flow going strong. Incorporate these strategies into your current payment procedure to keep your client relationships strong and your financial stress low.

Wondering if you are experiencing any major accounting problems? Check out our guide to the 7 biggest problems in bookkeeping.

7 Deadly Sins of Bookkeeping

 

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