When clients don’t pay on time, it’s a big headache that threatens both your sanity and your bottom line. Here are a few pro tips that should help avoid chronically late payers.
Source: How to Handle Chronically Late Payers | Square
I hate asking for money. Sure, I take pride in my work and I have no issues with being fairly compensated for services performed. But one of my least favorite parts of business is chasing down late payments.
If you dislike chasing down late payers, here’s a few tips for promoting expeditious payments! (now THAT sounded like a power statement)
Include penalties for late payment.
Square recommends that your business policies describe late payment handling. An example can be service charges clients incur at set intervals of delay. But, check regulations, which vary by state (like what is legally permissible to charge). Square recommends you include language about the suspension of work if payment is continually delayed. After all, if you conduct yourself as a professional and provide professional services and products, you and your business should be treated as such.
Cover your expenses first.
Sometimes a client can skip town and flat out refuse to pay. Instead of invoicing the entire amount, consider establishing progress payments that cover your upfront expenses . At WoodyThings we often charge an upfront deposit for custom orders, with the balance due upon delivery and acceptance. This enables us to cover the material and labor expenses up front, and profit is paid once the customer accepts and is satisfied with their custom order.
Offer discounts for early birds.
What’s the cost of being paid on time? If you’re in the business of billing your customers, perhaps you can offer a discount for settling the balance in full when due. Perhaps a 1% or 5% discount for paying on time.
It’s less money, yes, but the time you save chasing down late invoices may be worth it.
Automate your invoicing system.
If you’re an entrepreneur, your time is precious and the cost of chasing down payments can detract you from performing your core business, consumes time, and can lead to losing track of who’s been billed for their services. Consider implementing an online invoicing system (Square Invoices or Paypal) to make the process all a whole lot easier. Setting an email invoice template can reduce time and expenses.
You can also keep track of everything in one centralized place, so you know which invoices are outstanding and which have been paid.
Know when to cut ties.
Remember what I said about being professional and being treated as such? Although there are many reasons a business or person may fail to pay on time, if it becomes habitual, I recommend considering cutting your ties and being more selective with your clients. While the initial loss of income/sale can cause a hardship, as an entrepreneur you will find better use of your time.
Are you a business owner? Self employed? Process $1,000 without fees when you activate a Square account with my link.
How do YOU handle chronically late payments?