One of the most frustrating and demotivating parts of being a freelancer or contract-based business is having a client that doesn’t pay you on time. A late client payment does more than just throw off your company’s accounting; it can also cause stability problems for your business. To ensure you don’t suffer from poor cash-flow management, use these tips.
Send a Clear, Prompt Invoice
Sometimes the issues begin with procrastination on your end. To improve the relationships with your clients, you’ll need to create a comprehensive invoice with the date the invoice was issued, the address of both parties, and the payment due date. Use this freelance invoice by Bonsai to avoid paying high fees for a lawyer-produced invoice and legal advice.
Make sure you include the number of units you’re delivering or have delivered, the price, and a note that states any necessary details surrounding the payment type or processing fee.
Establish Payment Terms
A client can assume or make up their own payment terms, so be sure to put everything in writing via a contract. A common miscommunication can happen if they think you like to work on a net 30 basis or need to be paid on certain days like the 15th or 30th of each month. Your clients may use a payment term they’re comfortable with or used to.
Create a section in your contract that states the exact payment method you want your client to use, the due dates for collection, and other information relevant to these terms.
Offer Multiple Recurring Payment Options
When starting your business, you may not work with the same client more than once, but once you’ve established a long-term relationship, you can offer them a recurring payment option. Write in the contract a clause that if they decide to work with you for longer than 3 months, they can set up an automatic payment service through their bank, PayPal, or another software.
You may run into some difficulties if payments vary between each month, but if the client gives you their bank details, that amount can be subtracted automatically.
Reward On-Time or Early Payment
It’s not always easy to ask your clients to pay their invoices on time or even early, but if you establish an incentive to do this, they may make prompt payment a habit. Financial incentives are usually the most effective. Tell your clients that if they pay early, they’ll receive a 5% discount, or you could use a sliding discount scale that gets worse as the due date approaches.
As an alternative, you could charge your clients extra if they keep missing deadlines. Add a substantial interest fee, so they think twice about missing payments.
Add a Direct Payment Link to Invoices
A busy client may intend to pay you on time but could get lost in all of the browser tabs and log-in accounts that have to pass before getting to the payment screen. Your client won’t want to repeat the same steps to finish paying off an invoice, especially if they’re pulled away from the computer, so they may shut down for the day and neglect to pay you.
Integrate payment links directly to your invoice if possible. The easier the process is to get paid, the more likely you’ll receive prompt payment.
Automate All Invoices
Most of your clients will have a particular schedule that they want to keep. If you’re a day late sending an invoice, it could cause them to completely forget to pay you. Depending on how high-profile your client is, they’ll have to sort through multiple invoices per week. Automate your invoices, so they’re delivered to your client on time to limit their excuses for missing payments.
Schedule payment reminder emails that activate and send a week to a few days before the payment due date, so they won’t forget to settle up your invoice.