6 tips for getting paid on time
One of the most difficult things any business owner faces is that murky and usually somewhat awkward period between invoicing and payment. I hear it all the time, particularly from solo service-type businesses like consultants, coaches and speakers – “I have a bunch of invoices out there, I’m just waiting for them all to come back in.”
Revenue is vanity, profit is sanity… Cashflow is reality.
Unfortunately, it’s more of a rule than an exception that clients delay payment for as long as they can get away with it as a matter of “good business practice”. This is the flip-side of the same coin – Getting money IN QUICKLY has the same net effect on cash-flow as making sure it goes OUT SLOWLY. It’s in their best interest to hang on to cash for as long as possible.
So how do you win at this game? Here are a few things I do to make sure I get paid on time…
- Use a system that makes it easy to get paid – I use Freshbooks for my billing – It lets me send invoices online, gives clients the ability to ask questions and dispute, integrates with Paypal for online payment, and automatically follows up outstanding invoices if my payment terms are exceeded. It’s brilliant – and it’s FREE to use for up to 3 clients. I can’t recommend it highly enough – check it out for free here.
- Be upfront - Make your payment terms clear in all quotes and communication BEFORE work starts or goods are delivered. e.g. Payment due 14 days from delivery of goods, or Payment due 14 days from Invoice.
- Be REALLY upfront - Especially if you are in a services business, there is nothing wrong with asking for payment up front – incent your customers to pay upfront by offering a discount. This is a great approach for teachers, coaches, and anyone who has a recurring service – If someone pays up front for 6 weeks, you are 100% more likely to get paid for those 6 weeks – regardless of whether or not they actually show up.
- Be detailed in your invoice descriptions - One time I received an invoice from an accountant for a large amount with the description “For services rendered”. No mention of rate, tasks completed, authority to charge… Nothing. 120 days later I finally got the description of what it was for, and promptly paid the invoice.
- Be like the big boys – Ask for a “purchase order” every time. All too often invoice disputes (and delays) are because the client can’t remember asking for what you’ve just charged them for, and you’ve got no way to prove it they did. At the very least, send the client an email detailing what you’re going to deliver and for how much, and get them to confirm it by reply email. Problem solved.
- Be passive aggressive – Got late payers? As the business owner you don’t want to be the one hassling your customers for payment… There is an inevitable awkwardness to a “chasing up the creditor” conversation that has a negative impact on being able to upsell or resell to the client in the future. Get someone to make your calls for you – a spouse, partner or friend. Even better, use Elance or oDesk (BOTH FREE TO JOIN) to hire an overseas outsourcer to make the calls for you for a couple of dollar an hour. It’s simple, it gets results, and it’s a good crash course in managing employees.
Hopefully you find this helpful… It’s a journey getting this particular area right, so I’m sure I’ll be adding to this post in time!