How Do You Encourage Clients to Pay On Time?

Main engulfed in invoices.

Invoicing Best Practices for Small Businesses

Invoicing can feel like a hassle when you first set up your small business. It can be exasperating to send out invoices, only to wait for payment from clients for days or weeks. Here are several best practices you can use to make invoicing easier allowing you to maintain a positive cash flow.

1. Create Contracts

Many small businesses have decided to do away with contracts because they feel too complicated. Don’t be one of those businesses. Contracts are legally binding agreements, and they come in handy when a client fails to pay. Contracts also detail what all involved parties should know in terms of costs, time frames, and what actions will be taken should any agreement be broken.

When negotiating contracts or invoicing clients, it is of the utmost importance you pay attention to the details. Think about the “who, what, when, why, and how.”

  • Who is doing the work and who is having it done?
  • What work is being paid for? Also think about what work is excluded. For example, if you only do up to two rounds of changes in the original scope, then make sure you put that in your contract. Also include what additional rounds of changes would cost.
  • When does the work need to be completed, and what will happen if the work isn’t done by the deadline? When does payment need to be made on the completed work, and what penalties might occur if the invoice isn’t paid on time?
  • Why do you charge specific fees? For example, why charge a late fee or additional charges for extra rounds of changes? Briefly state in the contract that this is because of your additional time (for changes), and inconvenience (late payments).
  • How can clients pay, and how will delinquent payments be settled? Also think about including other aspects of “how” that will be involved in the project. For example, how often will you update the client on your progress, and how will the overall results be communicated?
Related: What to do When a Customer Won’t Pay Their Invoices

2. Allow Clients to Pay Early

Many clients want to pay off their accounts as soon as possible, and sometimes they don’t even want to wait until the project is complete. Allow them to do it, without charging extra fees for early payment. Not only does early payment ensure you get paid for the work completed, it also makes things easier for your client.

3. Offer Several Ways to Pay

Clients like to have a few different options when it comes to payment. You should accept as many of these as it is practical for you. The most common payment methods include cash, credit, debit, and mobile payments. Checks and money orders are also great options. Having several different ways that clients can pay for your goods or services makes it easier on everyone.

4. Communicate

Communicate regularly with your clients from the time you accept their project until payment has been processed. This ensures everyone is on the same page and can greatly reduce invoicing hassles.

5. Send the Invoice Immediately

Don’t put off sending your invoice. As soon as you have successfully completed the project you were hired for, send the invoice. Too often, small businesses will wait a few days to send invoices after project completion, but that just leaves another thing you need to check off your to-do list. Sending it upon completion of the work means you have one less thing to worry about, and the client can send payment that much sooner. Your invoice should have your payment terms clearly stated.

6. Require Deposits

A deposit is a great way to cushion against the financial blow of delinquent accounts. While most clients will pay off their accounts without issue, if you are in business long enough you will run into someone who tries to avoid paying. The deposit they placed against their account can help you to recount at least some of the funds you’d have received from the completed project.

Most experts agree that a 10 to 50 percent deposit is acceptable depending on the services you provide. This should be paid before the project is started.

Related: How Much Are Your Accounts Receivable Costing You?

7. Follow Up as Necessary

It may take a little while for the client to receive the invoice after you send it. However, it is a good idea to send an email or make a phone call to ensure the client received the invoice. After you’ve ensured they’ve seen the invoice, give them a few days to process the payment. If they haven’t paid according to your terms (net 10 or net 30 are quite common), follow up again to make sure everything is correct.

8. Always Be Professional

When a client is difficult, it can be hard to keep your cool. It is imperative you always maintain the highest level of professionalism, however. Don’t make threats if a client is refusing to pay your invoice, or is stating the work wasn’t done properly despite having checked off on it prior to the invoice. Instead, be professional and simply state that you will take whatever legal actions as needed based upon the contract if there continues to be an issue.

Related: How to Chase Overdue Customer Accounts Without Souring the Relationship

The Bottom Line

Small businesses can make invoicing easier on themselves by following the above best practices. They will not only ensure you get paid, but that you are protected in the event that a client doesn’t pay on time. Ultimately, you want to make invoicing easy for you and your clients, reducing stress for you both.

Your Questions Answered Quickly

Whether your business is thriving and you can’t keep up, or you are waiting on clients to pay, Universal Funding can help your growing company. Call us at 800.405.6035 or complete our rate form today to learn more about invoice factoring and how it can improve your company’s cash flow.

About Universal Funding

Universal Funding is a nationwide invoice factoring solutions leader, supporting growth-focused businesses with scalable factoring solutions. With its invoice factoring, payroll funding, and purchase order financing services, Universal Funding provides clients with the working capital needed to grow and support their businesses without taking on new debt. Ranked as one of the nation’s top invoice factoring companies, Universal Funding provides cash flow financing for businesses all across the United States.