FOUR WAYS TO GET PAID QUICKER

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Introduction

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One of the most vital parts of running a small business is getting paid on time.

Cash-flow is everything, and prompt payments are a lifeline. So, what do you do

when clients refuse to pay, or are slow to tie up invoices? These four simple tips

should prevent unwanted delays and difficult customers from damaging your

business.

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1. Write a contract

Even if your client’s a friend, don’t rely on a verbal agreement. An official contract

prevents misunderstandings. It lays out the work you’ve both agreed on, when and

how you’ll be paid, and what will happen if there are any disagreements.

Without this, it’s much easier for a client to make their own assumptions about pay,

and challenge what you’d agreed on.

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2. Take a deposit upfront

Take away the risk of a new client challenging your invoice, or avoiding payment,

by taking some money before you start any work. It shows clients you’re running a

professional business that wants to protect its interests, but also limits the risks

involved in taking on new clients.

Deposits are effective in two ways. The client’s less likely to pull out of the project

because they’ve already made a payment. And, even if the worst happens and they

don’t pay what they owe, you still have something for the work you’ve done – and

ideally enough to cover your costs.

Depending on the industry you’re in, a 50% deposit is the most common amount.

However, for especially large, expensive and lengthy projects, 20-30% will be

significant enough without startling your customer.

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3. Send your invoice quickly

When it comes to getting paid promptly, set a good example by sending your

invoice out as soon as the work is done.

In most cases, a customer plans their payments – especially substantial ones –

well in advance. They put money aside in preparation for the work being

completed. But the longer they wait for your invoice, the more likely they are to

forget about your money and spend it elsewhere.

This is especially common when you’re invoicing customers who are paying out

for various other work at the same time. If you’re a plumber for example, and you

delay your invoice, all of a sudden it’s in a busy queue behind an electrician and

a plasterer.

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4. Use penalty clauses

Nothing gets a client to pay promptly like a payment penalty. Try introducing a flat

fee which kicks in once a customer misses their payment deadline. Or you could

charge them interest on the overdue amount and add it to their charges.

Make sure these conditions are explained in full from the start, then customers

can’t complain if you impose them. But if they have a good reason for not paying

on time, try and reach an agreement instead of adding extra charges – repeat

business is worth far more than a bit of interest on a delayed payment.

Are you a small business looking for advice on any other subject? Check

out our other guides – they’re packed with practical tips that will save you

time and money.

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