18 Jun How to get paid on time, follow up outstanding invoices and keep your clients happy
Do you know how much money you currently have owed to you in outstanding invoices? If not, go and find out now.
I’ve known people to have several thousand pounds sitting around in unpaid invoices that they are ‘waiting’ to get paid for.
In fact, most business owners I work with are more willing to invest more time in getting new clients than spend a little time following up outstanding invoices and getting paid for work already done – what about you?
It may sound a little crazy when it’s spelled out like this, but there are reasons why lots of business owners focus more on getting new clients than getting paid by existing ones.
Often they come under the heading ‘FEAR’.
- What if you annoy them by asking for payment and they don’t want to work with you again?
- What if you offend them, and they were about to pay you anyway?
- They’ll pay you in their own good time, following it up makes it look like you don’t trust them.
- You don’t want to come across as ‘pushy’ and you want to keep a good relationship with them.
- The thought of asking for payment seems a bit ‘urghh’ and actually you’d rather even make those sales calls you hate instead!
Hard truth time – if you have outstanding monies due to you, you could be storing up a serious cashflow problem. In fact, this may be having a negative impact on your business right now.
Maybe it’s causing you to be late paying your own suppliers. Maybe it means you’re unable to invest in areas to grow your business. Or maybe it even means that you’re not able to draw out the salary you want for yourself.
I spent a number of years as a Credit Manager in telecoms so have plenty of experience in making sure ‘bad debt’ was minimised and that invoices were paid on time – my bonus depended on it!
I may not have a bonus anymore based on how keeping ‘bad debt’ low – I have something more important than that, and so do you – your business’ survival.
As much as you need to keep new clients coming into your business, if you’re not getting paid on time (or even at all), then how long can your business survive?
Here’s my top tips to help you get paid on time, follow up outstanding invoices and keep good relationships with your clients.
Review your payment terms and agree upfront
Do you have a defined period that you require payment within x number of days from the invoice date? If not, set one now to avoid any confusion with your clients and uncomfortable conversations further down the line.
If you do, review if it’s the right one. I find lots of people go for ’30 days’, especially working business to business. They assume this is the norm.
They’ll also assume that payment should be made after completing any work.
Don’t assume anything and define your own payment terms.
Maybe you need payment within 3 days of issuing an invoice. Maybe you also require payment in advance of completing any work.
With online banking, PayPal etc. it’s never been easier for someone to make a payment, even a big organisation.
They may not want to pay quickly and in advance as they have their own cashflow to manage, but it doesn’t mean they can’t.
Ask for what you want and be upfront and clear about your payment terms in advance of starting work.
If they are unable to meet this for some reason, then you can decide to flex it if you want to, but always start by asking for your ideal.
If you don’t ask, you don’t get!
Define your follow up process
Once you’ve got clear about your payment terms, and your customers understand this, then you need to define your process to follow up on any invoices that go overdue.
This really doesn’t need to be heavy-handed in any way.
Map out how many days after the invoice is overdue that you want to follow up and how you will do this.
For example, at +3 days you may decide to send a quick note by email with a copy invoice, as a reminder.
At +10 days you may want to call them. This can be a general call to catch up, and then to check they got your copy invoice and ask them when they expect payment will be made.
Make a note of when they commit to make payment and if it isn’t received then follow up again.
Tip: Have someone else make the phone calls for you, e.g. a virtual assistant or somebody who can say they are calling from your office and follow a script that you give them. This can make it less personal and help to maintain a good client relationship.
Don’t forget to mix different ways of communicating and consider what will work best with the types of clients you work with e.g. email, phone, text, letter.
Know your limits!
Don’t bury your head in the sand over outstanding payments.
If you think that a client has financial difficulties then react quickly to recover your money before it becomes your financial difficulty.
Also, if you have tried different approaches and still a client is not paying, then be prepared to escalate it.
At this stage, it’s worth looking at some of the debt recovery companies out there who will chase the payment up for you – usually either on a fixed fee or % recovered basis.
You may not get the full invoice amount back but something is better than nothing!
Do you have any experiences to share in getting paid on time or recovering outstanding monies? Please leave me a comment to let me know.
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