If your business works on a monthly invoice system or working as a freelancer, late payments and even non-payments are familiar to you. There are several reasons clients pay late or don’t pay, from lost invoices to additional expenses that customers can’t afford.
Many small businesses struggle to ask the client to clear the overdue payments without sounding rude. If you want your cash flow to be healthy, having a backup strategy is key.
How to Collect Overdue Payments
If a customer or client is unable to pay dues on time, here are few tips to ensure that payment gets clear while maintaining a good relationship with your client.
Discuss all the Payment Terms and Conditions Before you begin a Project
Before diving into the project, make sure the client or customer is aware of the project cost. Take time to make the customer understand the additional costs needed and answer all the questions upfront.
Putting everything on the table before diving into a project helps to set payment expectations and establishes the trust required for a strong customer relationship.
Having clear from the beginning helps to clear payments and build customers’ trust. If anything is additional required alert your customer before adding it to the bill.
Ask for Payment Before Starting Work
If you think it is risky to send an invoice system, ask for full or half payment before diving into the project. The only way to mitigate the nonpayments is by asking for some amount of payment, to begin with, the project.
Some customers or clients may feel wary for paying before receiving the work- but that’s how it works. To assure the customer, encourage them to read testimonials or share your previous work.
If you have a spotless track record and trust relationship with your client, you will earn more rights to take payment before work. If customers need more assurance, share any previous clients’ details and ask them to talk with them.
You can ask for quarterly or half payment of project from the customer, who seems not a good fit.
Send Invoices Right Away
With a small business owner or a freelancer, it can be easy to lose track of your customers. You may forget to send invoices to some of your customers, and going around them for payment can hurt your reputation.
Sending an invoice as soon as the work gets completed helps to maintain a track record for each client and avoid falling for payment.
Charge for Late Payments
No one likes late payment for their work. Set up a system that is backed by terms & conditions of services. For example, if you don’t pay within the first week, you get a warning. And late for a second-week penalty of 5% on the payment.
Set a Payment Method
If the customer or client has cash flow issues, setting up payment issues can help to ensure payment. As a part of payment, negotiate with the customer on the payment, and make it affordable for the customer.
Specify the period for the payment clearance.
Conclusion
Generating trust with your client or customer can help to ease the problem of payments. Make sure to put engagement terms in the contract with the customer including-
- The timeline of payment clearance
- Payment terms including- late fees, penalties, additional payments, etc.
- Scoping boundaries.
