Accounting for project management can help you finish your firm’s projects more efficiently while improving your relationships with your clients.
How to Optimize Cash Flow: Get Clients to Pay Faster
Get your clients to pay quickly so your firm can optimize your cash flow and boost overall productivity and profit.
Optimized cash flow means most clients—hopefully, all clients—pay quickly. It also means that back-office staff spend far less time monitoring Accounts Receivables and calling clients, which boosts productivity and profit.
How Do You Get Clients to Pay Faster?
Optimize Cash Flow in Contract Requirements
During contract negotiations, invoicing, payment, due dates, and the consequences of not paying in a reasonable time (finance or late fee charges) are often forgotten or not discussed. You should discuss these up-front if you want clients to see you as a professional and clearly understand how you operate.
But few contracts or engagement letters include the most important consequence of late payment: work stoppage.
Clients need your services and need them completed on a schedule. For example, a client who is constructing or rehabilitating a structure cannot afford to have their architects and engineers stop work. It costs them thousands or tens of thousands of dollars per day because subcontractors will need to shift to other jobs. Interest on loans also piles up. Similarly, a client who puts off paying their accountants on time may find their financial statements, required by a bank, unavailable.
While stopping work, in some situations, may be deemed unethical or illegal, most professional services firms can and should include payment consequences in their agreement—including what triggers work stoppage. For example, do you stop work when an invoice is more than 45 or 60 days past due? This provision ensures that the client does not treat your firm as a bank. While finance charges may compensate for a payment delay, work stoppage becomes a lever for clients to use as a negotiation tactic.
Note: A ‘work stoppage’ clause in an agreement should not be hidden. Along with the scope of work, it should be discussed up-front along with the due date, finance charges, and other payment elements.
Send Out Timed Invoices
Every company pays its bills on a cycle: 10th, 15th, or whatever. Research shows that if you time the delivery of your invoice with a client’s Accounts Payable cycle, your invoice will be near the top of the stack. This makes it easier for the client, too. A part of any services discussion, you should ask your client when, during the month, they pay their bills.
Note: Even if a client follows a “bill evaluation process,” the finance charge and work stoppage provisions of the agreement will stick out.
Make Payment Easier with e-Payments and Payment Plans
To make it easier for clients to pay your invoices, offer e-payments and payment plans.
e-Payments are payments made by credit cards and e-checks via a link on your emailed invoices (or statements). The client simply enters their credit card or e-check information into a super-secure portal.
With BQE CORE ePayments, the payment information updates automatically. You can also process their e-payment while on the phone with them with the same high level of security.
Important: BQE CORE does not store client credit card information or account information in your database. It is handled by the payment processor, which follows Payment Card Industry (PCI) stringent security requirements. Your risk is very low. They also prevent, detect, and react if potential data breaches occur.
How do you get clients to use a credit card or e-check?
For both credit cards and e-checks, the biggest benefit to the client is faster and easier payment. They don’t need to take time preparing, cutting, and mailing checks. The time can be used for more productive tasks. For credit cards, clients likely receive points or cashback.
But the payment processor charges a fee, will revenue take a hit?
Think about it. No, “the check is in the mail.” No handling checks, no data entry, and no running to the bank with deposits. More, you’ll spend less time reviewing Accounts Receivable Aging reports and making collections calls. Ultimately, you could save up to five days a month with processing, identifying who to call, and making calls. This results in improved productivity for high bill rate managers and back-office staff.
What if the client can’t pay the full invoice?
Offer a payment plan.
Something may happen in the client’s operations that impacts their cash flow. Or, your appreciated services may cost more than planned. Step up and offer a payment plan. Clients will appreciate your efforts to work with them and ask for your help in the future. And likely, they will refer others to you.