When you’ve accepted a late payment from a client for the hundredth time, you know it’s time to change the way you play the game. Managing client payments is one of the least fun aspects of being a solopreneur — well, unless you’re a bookkeeper. Waiting on money isn’t just frustrating, it can seriously derail your entire business. And that’s a big deal. Since we’re no longer employees with scheduled paychecks, it’s now our responsibility to make sure the money keeps coming in. There’s no room for late payments if you want to run a sustainable small business. Want to get paid on time, all the time? Follow these tips.
Automate Payments (When Possible)
Here’s the biggest secret to avoiding any and all late payments: Set your clients up on a system that automatically bills them via a card on file for products or services before they’re even delivered. Sure, this method works better in certain industries, but if you work in one of those industries, make sure you jump on the automation ship — and never get off.
Always Have a Contract in Place
I’m amazed at how many independent workers avoid getting signed contracts before any work begins — especially when a contract is your opportunity to lay out any terms related to payment. Be extremely clear: Late payments are a void of contract, and repercussions will come from an overdue balance, like an interest charge or an immediate stop of work.
Negotiate the Terms for Each Client
One reason clients may pay your invoice late is simply because your terms don’t match the way their business runs. For example, if payment is due on invoice, but their business runs on 30-day accounting terms, your systems aren’t really synced to work harmoniously. Now, I’m wishy washy with this tip, because I think all freelancers need set the groundwork for what they think is acceptable. Just because someone wants to pay you 60 days after you complete the work, doesn’t mean you have to accept those terms. If you’re willing to negotiate payment terms, have a conversation about what works for both parties before you even sign the contract.
Put the Payment Terms on Invoices
Are your payment terms on all of your invoices? No? Why not? Your clients need to know how they can pay you, whether by check, card, cash, PayPal … the list goes on. Again, remember to make it easy for your clients. That way, if there’s a new person in accounting, their naiveté won’t be an excuse when the bill is past due.
Establish (and Reinforce) Consequences
When there are no consequences for late payments, clients will take advantage of your leniency. Don’t let that happen to you. Instead, charge late fees and interest when applicable. And don’t feel guilty about doing so: If you’re using a contract and putting all terms on your invoices, your clients will know how high these fees are way ahead of time. If they default, that’s on them. Not you.
Follow Up Immediately on Late Payments
Now, even if you enforce some (or all) of these precautions when you’re managing client payments, you still may end up getting late payments from time to time. If you want to avoid the waiting game, make sure to follow up quickly. I get it — you’re worried you’ll be annoying. You want to give some leeway to your clients, especially if they’ve been quick to pay in the past. But being nice isn’t getting you paid. Set up an automatic email to go out the day after a payment is due, alerting clients that they are now in arrears. Then, follow up a few days later by phone. If your direct contact suddenly goes missing, contact their superior or accounting department.
Managing everything alone is hard when you’re a freelancer, but prioritizing payments is key to making sure your business marches on. By following the steps above, you can help to avoid a potential hit to your cash flow.