Any Entrepreneur or person who handles company invoices has found themselves in this situation. You have delivered on your work, invoiced your client and have now waited 30 days as per the standard agreements. It’s now 4 weeks past the 30 day mark and you still have not received payment.
This can be a huge burden on a startup and can create cash flow problems for any business. So what can you do about it without potentially losing your client that still benefits both parties?
- Ensure your clients are on the same page with payment expectations from the start. Make sure there is an agreement on the payment plan whether its 30 days, immediate or even 60 days and make sure your clients know of the invoicing process. (i.e. when you invoice)
- Make sure your clients know interest will be charged for late payments as it is normal to charge an interest fee on late payments. If you decide to, make sure your clients know this and at what percentage.
- Set up some sort of account management system. This will help you manage where your invoices are and which are overdue. There are many options out there and you just need to find the one that suits your needs.
- Identify when to follow-up with your clients. Sometimes its good to give them a few extra days after the due date for the payment to reflect or processing. This greatly depends on your client, so use good judgement.
- When the payment is overdue you should still treat your clients in a professional manner and with courtesy. Yes, the payment is late but don’t assume it was done out of spite. Maybe someone forgot or a critical person was off sick and it was not attended to. Always be polite.
- Always send a friendly email when you follow-up for the first time after late payment. Keep it simple and attach the original email for ease of reference. Don’t be rude and just ask if there is anything you can do to help with the process. If an email doesn’t work try sending a statement a few days later.
- If you have followed the above steps and still have not received payment, its time to call them. Ask them what might be the problem and when you can expect to receive payment. Ask if there is anything you can do from your side and remember to be professional and polite. Their answer will give you an indication of what comes next.
- The last step after all else fails is to charge interest and refuse to continue with any current work until payment is made. Just remember this is the worst case scenario and for regular problem clients you can ask to change your payment plan to suit your needs. Maybe try a 50% upfront payment and then the rest on completion, which can save you a lot of stress.
If you find you don’t want to go through the whole process above you can opt to hire someone else to chase payments for you. This means you can focus on the business and avoid the stress of the process!
Photo Credit – ncta.com