Cash is king and the key to the throne is getting your customers to pay you on time. In my experience early payment discounts and late-payment penalties don’t work very well but here are some tried-and-tested tips to get the cash rolling in:
1. Be clear about your payment terms. Use a colour printer to highlight the due date of an invoice in big, red letters so that customers know what you expect.
2. Invoice quickly. Don’t wait until the end of the month to do an invoice run. If you have delivered the goods, send in the invoice. Every day’s delay costs you money.
3. Check they got the invoice. A week after you send in an invoice, call your client and politely check they received the invoice. The old excuse ‘it got lost in the post’ is still common but it’s much more likely to get lost in someone’s in-tray. So get confirmation that they have actually received it.
4. Be friendly (but persistent). It also helps to establish a friendly channel of communication with your client’s accounts payable people. If cash is tight, they’ll often delay payments to companies they don’t know or who don’t chase them. You want to be in the other category from the start. And you definitely want to be polite (if firm, diplomatic and persistent) rather than angry or stressed.
5. Send reminders. Send a reminder about a week before the due date and then on the due date. Once the invoice is overdue, you can use colour and design on your statements and invoices to emphasise the invoice status.
6. Give people lots of ways to pay you. The worst way to get paid is a cheque because it can get lost and it takes time pay in and clear. Make it easy for people to pay you online with PayPal or direct into your bank account with BACS. You could even look at accepting payment in Bitcoins.
7. Go nuclear. If persistence doesn’t pay off, a lawyer’s letter should produce rapid results. You can even sue someone online at the Courses & Tribunals Service’s Money Claim site. There’s a risk to the relationship, of course, but a court summons usually produces instant results.
8. Re-consider your business model. Can you charge a retainer? Accept credit card payments? Ask for an advance payment before you start? There’s no law that says you have to invoice after the fact and then accept a 90 day wait for payment. Change the rules if you can.