Regardless of the stage in your business or career, lack of prompt payment from clients is one of the common causes of cash crisis.
And without doubt, this is an ugly experience that no one wants to enjoy or prolong.
Whether you are a small business owners or service provider, late invoice payment is a familiar experience. In some cases, this can push people into shameful borrowing, lateness on public utility bills and sometimes forceful ejection as a tenant.
Understandably, there are some circumstances that could force someone into bargaining for late invoice payment, consciously or otherwise from day.
Probably different from your current practices, here are some tips to help you get head regarding prompt payments for your work or worth. By putting them to work, you’ll begin to experience better financial outcomes and measurable progress. Let’s dive in.
Large Upfront Deposits
Even if you are under pressure to accept whatever terms proposed by your prospective clients, make a long term policy to ask for large upfront deposits. In this case 10% may not cut it.
Aim for 50%+ deposit before starting work.
With enough qualified leads in your pipeline, if you have communicated your value propositions proposition properly, you’ll have a reason to stand your ground. Asking for and getting sufficient deposits cuts down the risk of late payment on your invoices.
Milestone Based Installments
I Learnt this when I started freelancing inside Elance which was later merged with Odesk to become Upwork.
With small or large upfront deposit, milestone based payments protects both buyer and seller of services. Based on defined deliverables and milestones, both of you will be measuring progress toward the final completion.
The interesting thing is it makes clients aware of the fact that without prompt payments, the project won’t be completed at all. And for you the service provider, if you don’t deliver quality work, there won’t be any point progressing to the end.
Assuming you got 50% deposit from the start, the rest can be divided into 2 – 3 installments.
Complete Payment Before Handover
Depending on your circumstances, you shouldn’t bargain to deliver complete and then ask for payment later. Doing this will give your clients 100% control of everything, both during and after the project.
This also implies that you can easily be fired after putting some good amount of time before reaching the very end of specified deliverable. Don’t bargain for this. Make your prospective clients understand from day one that they will pay complete amount before the final deliverable. Think about the part of the work you can retain control of, before the final payment.
Prepaid Retainer Agreement
These are agreements used to define supplier and client relationship over a specific duration of time. Typical retainer service durations range between 3 – 12 months.
However, applicability depends on the type and value of services you are delivering.
The main fact is that both client and service provider goes into the relationship with an understanding that payment must be made for each new month before moving to another month. This is the sweet spot for digital marketing experts and agencies.
In the recent past I have worked with clients for like 3 – 8 months in a row for Google adwords and search engine optimization services and the payment model was prepaid retainer.
Eliminate Location Barriers
Lots of business owners and professionals often find the need to travel from time to time. Sometimes it could be planned vacation, honey money or emergencies. And when that happened, you may hear statements like ‘our accountant is not in town’, ‘the person that signs cheque is not around’.
online invoice software like Acute Invoice enables your clients to pay you from anywhere they are. Practically, this is better than putting your life on hold because someone traveled. Just try to establish relationship with the person in charge of payments.
Leverage Automated Reminders
The key thing here is that you don’t have to wait until your invoice payment is past due before sending reminders. Sending 1 – 3 reminders prior to the due date won’t hurt at all. However, if you are using milestone based installments, your invoice is likely to be due upon receipt.
With online invoice software, you’ll be able to send automated reminder emails to induce prompt payments.
This means you can set it up to go out on specified dates without much time consumption.
Now imaging a situation where you have multiple clients that you need to remind periodically. Wouldn’t such a tool save lots of time?
Don’t Rely 100% On Emails
Let’s face it – a whole lot of times, life get in the way.
Emails remain forgotten. Bills stay unpaid for an undesirable length of time. Interestingly, many things often lead to this. For example, someone could travel and not in physically present to sign cheque. This alone is enough to ignore your invoice payment reminder emails.
Maybe positions and authority changed in the organization you are expecting to get payment from. In such cases, if you have to depend 100% on emails, then you are automatically bargaining for late payment.
Pick up the phone and start calling, You may also consider visiting the office location.
These are some of the practical strategies you can leverage to avoid late invoice payment from clients. Because your clients don’t withhold payments on their food and utility bills, why should you accept terms that makes life harder for you and your family?
When you are starting out in your service based niche market, it may be really hard to dictate terms of working relationship.
To increase your bargaining power from the onset, just have a means of filling out your sales leads pipeline as consistently as possible. So you don’t have to depend on one client or deal for your entire means of livelihood. Go put these into practice and see what improvement is possible.
