You need prompt client payments to maintain steady cash flow and pay your bills on time. Chronic late payments can cause big problems for your company, including your ability to cover expenses and sustain operations, and even trickling down to affect your credit. On the bright side, there are simple policies and workflows you can use to help you get paid quickly.
Improve invoicing practices for your firm and receive more on-time payments by offering convenient payment methods and incentivizing clients to pay early. With these tips and more, you’ll spend less energy tracking down overdue invoices and more on delivering excellent client results.
Set Clear Payment Terms
Make sure clients know your payment terms and conditions up front, including late fees that will occur if their payment is late or incomplete. It pays to be clear — including terms on your invoice makes your firm 1.5x more likely to get paid on time.
Let your client know exactly when their payment is due, payment instructions, accepted payment methods, and any penalties for falling behind. You should communicate this information before a client receives their first invoice, and ideally, before both parties sign a contract to work together.
Be careful about the timeframe you give clients to pay. Too short, and it can hurt your relationships, but too long, and your chances of getting paid on time decrease. Traditionally, invoices have been due 30 days from the date they were issued, but online invoicing has tightened up that window, with many companies asking for payment sooner.
Many of us now prefer to pay online for its convenience, immediacy, and confirmation that payment was received. It’s a trend that’s expected to continue. By 2024, an estimated 80% of transactions will be electronic.
With fewer people willing to write a check and pay a bill via mail, it’s important that your company accepts multiple forms of payment, including secure online payments. Accepting various payment types, such as credit card, debit card, cash, check, and ACH payments widens the audience of people willing to work with you.
Allowing clients to pay the way that’s most convenient for them helps you retain their business. If it’s seamless, they’re more likely to work with you again or recommend your company to their network.
Additionally, online payments make it easier to set up and process recurring invoices, offer subscriptions, apply discounts, and collect late fees. Plus, you generally receive your money faster when it’s processed online (in only a few days), rather than waiting to receive a check in the mail (sometimes up to 1-2 weeks).
Who doesn't love a deal?
Reward clients who pay early with a small incentive, discount, or freebie, and they may be more inclined to continue paying early. The discount can be a set amount or small percentage, even 2%, of the total invoice amount.
Often this is enough to motivate clients to pay their invoices a little earlier. But first, confirm that the discount you offer won’t cut into your profits.
If you can’t give an incentive, show your appreciation by reaching out to your client to thank them for regularly paying on time. They’ll appreciate the recognition, and it may spur them to continue their on-time streak.
Keep a Late Payment Schedule (and Follow Up!)
If an incentive doesn’t encourage clients to pay on time, a late fee might do it.
It’s common to charge either a flat fee, tiered fee structure, or percentage of their bill for missing a payment deadline. As mentioned above, always be clear about late fees early on in working together so there’s no confusion.
Include the fee notice in your initial invoice to a client and send reminders before they’ve missed the deadline.
Invoice in Phases
Many project-based firms invoice clients in phases, collecting payments along the way instead of one lump sum at the end of a job.
These phases can be time-dependent (e.g., monthly) or once a project milestone or phase is complete. Clients often appreciate milestone billing because it offers them transparency into your progress and provides natural check-in points.
Alternatively, for larger projects, you can require a deposit (usually half the bill) at the beginning of a project and then collect the rest once work is complete. This helps you pay for any upfront expenses, evens out your cash flow, indicates you’ll get paid at the end of the project, and lets your client space out payments.
Whatever your preferred billing method and schedule, just be sure you’re consistent. If you bill clients at unpredictable intervals, it makes you look unprofessional, can disrupt your cash flow, and hurts your chances of receiving prompt payments. Invoicing at predictable intervals helps clients plan ahead and allows your company to collect money faster.
Use Smart Invoicing Software
Use invoicing software to efficiently send invoice notifications and reminders, helping clients avoid late payments and getting you your money sooner.
Automating this saves you the trouble of chasing down overdue invoices manually. Software makes it simple to send email reminders that keep clients aware of their invoice status and encourage them to pay ASAP.
With an automated invoicing system, you can avoid the mistakes that come with using Excel for payment tracking. You can also set up recurring invoices, so if a client has agreed to a monthly payment schedule, a reminder is sent before it’s due, on the due date, and as soon as they fall behind. You’re free from chasing down late payments and able to focus on running your firm.
Automatic invoicing workflows also help you to invoice clients sooner. The sooner you send someone an invoice, the sooner they may pay it. Procrastinating sending out an invoice delays the entire process. Instead, automate invoices to go out as soon as you complete a milestone, phase, or entire project.
A platform like BQE CORE allows you to set an automatic billing schedule at the project level, including invoicing frequency.
Better Invoicing and ePayments with BQE CORE
Late payments can snowball into more than a minor inconvenience, eventually putting severe strain on your cash flow and making it difficult to sustain your firm.
Fortunately, the right processes and a smarter invoicing platform, like BQE CORE, help you receive payments faster, reduce late payments, and minimize the time you spend on manual invoicing tasks.
Use BQE CORE to automate invoices, generate recurring invoices, accept ePayments, track payment status, manage project-level accounting, monitor overall cash flow, and more.
Schedule a free demo to learn all the ways BQE CORE can make your firm more profitable, productive, and organized.