Sorting out collecting in payments due to your business really is critical as you will spend far too much time chasing outstanding payments (as you may already be finding) and your cash flow may be so adversely affected your business is put in jeopardy.
To make sure you get paid on time, follow these tips below:
Decide Your Payment Terms
Decide when you want to be paid and make this clear to your client. Don’t let the client dictate to you.
Depending on your business you may decide upon 30 days payment, 14 days, immediate payment or payment up front before any work is undertaken.
And you don’t have to stick to just one payment term for all your clients. You can amend them dependent upon who you are working with.
I have used a variety of payment terms in the past (and still do).
For my freelance work with large corporations that I have a good working relationship with, I work on 14 days payment due after the work is delivered. With business advice and consultations with individuals, I work on payment up front before any meetings take place. When I run my local workshop, I allow payment on the day.
For larger projects, you may consider splitting the payments and I do this when I release one of my more expensive courses. I ask for a percentage up front followed by 3, 6 or 12 monthly payments, depending on the type of course I am delivering and its length.
It’s your business, you know your cashflow (or you should!) and you decided what works for you.
Have a Contract
Once you’ve decided what you will be providing and when and how you want payment, you need to get this all written up in a formal contract that will be agreed and signed by your client.
Clearly state the payment details, what you will deliver in return for payment and what happens if a payment is missed or late.
Personally, I add a late payment charge into my terms and conditions and make it clear this will be automatically added to the client account if payment is not received within 48 hours of the due date. I also add that all work will cease until full payments have been received. I put in an explanation that this charge is to cover administrative costs in chasing payments and for not adhering to contracted terms and conditions.
Once you have your contract written up, make sure all details are included such as your name, business name, contact details and client details. Sign it, date it, send two copies to your client and ask them to do the same before returning one to you and keeping one for their own records.
When I first did this many moons ago, I was afraid this may put off potential clients. I know realise this is one of the most sensible things I have done as if anyone does not agree with these terms, I don’t want to do business with them. Paying clients are what I want, not freeloaders.
A contract also helps should there ever be any query about a payment in the future as you can both refer back to the agreements that has been signed by both parties (yes, you must get them to sign before you start any work!)
One of the easiest ways to administer collecting payments is to use accountancy software. I personally use FreeAgent where I have all my payment terms laid out and once a contract is agreed, I create recurring invoices to be sent on due dates. It is also possible to send reminders prior to the invoice due date to remind clients to pay and to automate unpaid invoice reminders.
On each of these reminders, I highlight the fact that a late payment will be automatically added should the payment not be received. This relieves me of having to send individual emails to clients and the yucky feeling that can sometimes be felt when chasing payments. It really is a huge time saver.
After having a few late payments and introducing this system, I have only ever had one defaulter.
Below are a number of different financial software solutions for you to have a look at. There will many more out there but this is a small selection to consider. Yes, there is a cost to these but if it saves you stress and gets your payments in, it will be well worth it.
Package prices start at £19.99 + vat PCM. I heard so many good things about this that I just had to switch to it myself and now don’t know how I ran my business without it. I just love it. If you want to use it you can get a 10% discount by using this link
A free option for just one client. Package prices start at $19.99 PCM
Pricing starts from £5 + vat PCM for sole traders. Has add-on features such as CRM.
Pricing starts from £9 PCM. A simple calculator to see which package is best for your business.
Pricing starts at £9 PCM for up to 5 invoices. Lots of add-on features[print-me]