How to get paid on time
Nov 08, 2018
You’ve done the work. You invoiced the customer 60 days ago. And yet you’re still waiting to get paid 30 days after payment was due. Sound familiar?
It’s never easy chasing customers for payment. It can be an uncomfortable process, and it’s also a waste of your time that could better spend elsewhere. However, this is business and you are entitled to be paid for the work that you’ve done. It helps to have procedures in place to avoid this situation, and to follow a set approach to recovering what you’re owed.
Manage expectations for getting paid
You should clearly set out your invoicing and payment terms with your customers early on, and make sure that all your invoices are comprehensive and well-formatted. If you’re dealing with a new customer, consider asking for 50% of the cost before you start doing work for them. Talking about these terms with your customer up front will help to avoid any awkward conversations further down the line. When you submit an invoice, ask if there’s any reason why it might not be paid on time. People generally don’t like to go back on their word.
Discounts and interest charges
Some firms offer customers a discount for settling invoices early. You could offer your customers a 5% discount if they pay an invoice within 10 working days. Conversely, you could charge customers 5% interest for payments that are over 60 days late. You can set this out in your payment terms at the very beginning of your interaction with a customer.
Understand why your customer is paying late
Part of any relationship with a customer involves an element of good judgment. If you have a long-standing connection with a customer and suddenly they don’t pay you, then it makes sense to understand their reasons for not doing so before jumping in with payment demands.
There are numerous situations when customers either don’t have the funds to pay you, or they’re using a delaying tactic to help manage their own cash flow – such as by questioning the quality of your work or demanding a discount not previously agreed. Some larger businesses only do payment runs on certain days, and they expect you to fit in with their schedule.
It’s a good idea to create a standard email that you can send out to customers as a payment reminder. Your tone should be firm but not aggressive – a gentle reminder won’t be seen as pushy, and in many instances people appreciate a prod and will react positively to this.
You should set out that payment is due, and in an ideal world make it easy for your customer to click through to an online payment page so they have the option to settle their bill immediately. If you have no response to two reminder emails, follow up with one or two phone calls. Make personal contact with the person who hired you to do the job, rather than the finance department. Ask if they can help speed things up at their end – and be nice. It pays to stay calm and treat everyone with respect – if you’re polite but firm you’re less likely to get pushed to the back of the queue.
Recovering an unpaid invoice
If you need to escalate the situation, make sure you’ve got all your facts totally straight first. State clearly what you want to happen and ensure your customer understands. Check your invoice date and payment amounts, check the customer’s contact details, check your payment terms. Keep a note of all communication you’ve had with the customer so far, including phone call times, dates and who you spoke to.
If you do proceed to court recovery then you’ll need to prove that you followed a fair process, so keep a record of all correspondence. The gov.uk website outlines your rights, and stipulates that a customer must pay you within 30 days of receiving your invoice or the goods or service you provide. Any longer terms must be agreed by both parties involved.
Striking a balance
Your customers are busy people. Sometimes they forget to process invoices and they might be a bit behind on their admin work. Sometimes a gentle nudge is all that is needed in order to ensure payment. You need to strike a balance between regular follow up and maintaining a good relationship with your customers, so that they come back to do business with you again in the future. Firm but fair is best.
If you’re struggling with cash flow and getting your customers to pay on time then give us a call and we’ll be happy to help.