Running a business is filled with endless, frustrating and anxiety-provoking tasks. Deciding when to follow up on invoices is one of them. If you work one-on-one with your clients, it can feel uncomfortable to ask when you’ll get paid, but the only way you can run your business is by receiving income for your hard work.
Here are seven tips to ensure clients pay your invoices on time.
1. Start With a Contract
So much business happens by verbal go-ahead or quick email agreements, but these methods don’t typically cover all the terms that need to be addressed, such as when payment is due or what will happen if the invoice isn’t processed in time. Without an official written agreement outlining your payment terms, getting someone to pay you can be a nightmare. Set yourself up for success by clearly outlining everything from the start. Require signatures from your client and yourself, showing both parties agree to the terms.
2. Be Precise in Your Invoices
What takes accounting departments so long to pay invoices? It’s usually due to payment requests not being detailed enough for their system. If you’re invoicing for $800, make sure you break it down, so the accounts payable clerk can easily justify and process the payment.
For instance, what does that $800 amount to? Did you bill $100 for an hour-long phone call and then $350 for two different graphics? Include all that information so the payment processor doesn’t need to track down the person who hired you for an explanation.
3. Send Paperless Invoices
Here’s another reason accounting departments take a long time to pay invoices: Paper gets lost. You might have sent your invoice by mail to your contact, and it ended up in a pile on their desk for two weeks. Instead of admitting it to you, they may send it to accounting, where it sits in another pile for two weeks before being entered into their accounting software. An entire month went by before any work was done on your request, and now, you’re left waiting.
When you send electronic invoices, it’s easy for your contact to forward them to their processing team (if they don’t pay you themselves). Better yet, ask for the email of the accounts payable team and send the paperless invoice to both people in the same email. This way, if your contact needs to approve the invoice, they can do it at the same time.
4. Offer Multiple Payment Options
If you’re only invoicing and getting paid via check, you’re lengthening how long it will take you to receive payment. Electronic funds transfer (EFT) payments and credit card processing software will help you get your money instantaneously. Well, almost in an instant, depending on whether they pay up front or are automatically invoiced at a later date.
5. Offer Incentives for Quick Payment
Here’s a trick to get people to pay quickly: Discount your invoice by a small percentage to clients or customers who pay in a certain time frame. You could make your discount a simple 2 percent, but the client who owes you $800 will save $16, and saving money is a huge motivator for any business owner.
6. Follow up Quickly
I understand how awkward it can be to contact a client to follow up on invoices. When I first started out, I avoided these questions and just used the power of positive thinking. But, after too many missed payments and a quickly accumulating balance from one client, I decided I needed to enforce those detailed contracts I set up.
In the end, my contact gave the invoice to one person in the accounting department who started maternity leave a month and a half earlier than expected, and the invoice was living in her email that no one (unfortunately) could access. So, no one at the company was actually aware I wasn’t paid. My bank account got a nice deposit in just two days time from my first request to be paid.
The key for follow-ups is to not give too much grace time before emailing. People get busy, and papers and emails get lost. If you connect respectfully and quickly, most clients will put the effort into seeing you get paid.
7. Word Your Communications Well
When you’re frustrated and anxious about waiting for your money, it can prove difficult to keep your cool. However, a bad attitude won’t help you get paid. Be kind and to the point. If you’re nervous about contacting them on your own, task this job to a virtual assistant. Here are a few sentences to get you started:
- Before the Payment Is Due: “Hi, Bob. This is a friendly reminder that invoice #0001 is due in 7 days. Thank you so much for your business and continued support. I’m always grateful for clients like you.”
- Shortly After a Missed Payment: “Hi Bob, I know how busy things can get, so I wanted to check in and let you know that your invoice is now two days overdue. Please remit payment by June 3. Thank you!”
- Follow up for Nonpayment: “Hello, Bob. This is a notice that your payment is now 14 days overdue. Per the terms of our contact, daily interest will now accrue at a rate of (insert amount). Here are the ways you can pay the invoice (include the details for virtual and paid-per-mail payment). Attached is the original invoice for your records. Thank you.”
While no one enjoys hounding their customers for payment, it’s a normal part of business, and knowing how to handle it with tact will get your invoices paid quickly and efficiently.