So you’ve gone through all the work to set up your business.
You created a website.
You mastered your craft.
You delivered a great final product.
Now you send off your invoice and wait. And wait.
But what if that payment never comes?
Late Payments Happen to the Best of Us
Luckily most of the clients I’ve worked with have been really good about paying. Most of them will actually pay my Paypal invoice within a couple hours of me sending it!
I have worked with one client who consistently paid me later than our agreed upon terms though. It’s awkward because you don’t want to seem rude, desperate, or unprofessional.
For most proud business owners, you probably cringe at the thought of having to beg for your money.
It’s especially hard when it’s your main client who is bringing in the majority of your revenue each month. For me, it was a client who always took twice as long to pay as we agreed upon.
Now, I always got my payments within 10-15 days, but we had agreed upon payment within 5 days up front. THEY were the ones that wrote it into THEIR contract, I didn’t even ask for it!
To be honest, I probably would’ve been fine if they took 30 days to pay as long as we agreed on that at the start. But a client continually dishonoring your terms, no matter what they are, is annoying and stressful as a business owner.
You always wonder if this will be the month that you don’t get paid at all. Fortunately I’ve been pretty good at picking the right clients to work with, and I’ve always received payment for my work eventually.
But if you’re in business for long enough and working with enough clients, late payments are almost bound to happen. But there are absolutely some things you can do to minimize the chance of it happening to you.
Stuff To Do Up Front
You’re bound to have late payments at some point. But there are some specific things you can do to minimize the risk.
Set terms and expectations early on. Ideally they’re written down in a contract. Getting it in writing at the start will make it less awkward to ask for payment later on. You’ll need to establish terms with each individual client you work with.
Your terms can be whatever you want. I always set my terms as Due on Receipt. This is the default when you’re creating an invoice in Paypal.
Before I was a writer, I worked as an accountant. Both in accounts receivable and accounts payable. So I know a decent amount about invoicing and the tricks that companies try to pull on both sides.
As a customer, we always wanted to stretch our terms out as long as possible.
In fact, my department even had a list of customers that showed which ones absolutely needed to be paid on time or they’d complain, and which would let late payments slide for a few days.
If you don’t show clients that you’re serious about getting paid when the invoice is due, you risk having them start to bend the rules.
Make paying as easy as possible. Clearly outline the payment methods you accept on your invoice, and how customers can go about paying. Having an online payment solution really helps. Clients can log in to pay you at their own convenience, instead of having to call in a credit card number or mail a cheque.
Invoice promptly. Right after you’re done the work for a client, be sure to send an invoice immediately. That way there’s less risk of you forgetting to send it, and it will still be fresh in the client’s mind.
Make sure to include a due date. Give your invoice a clear due date, otherwise how does your customer know when they need to pay you by? You can include a line about late fees as an extra scare tactic if you want, although as a small business it will be difficult to enforce.
Make sure your customer is happy with their order. If there are any problems with it, you’ll want to get it resolved right away. Not have them sit silently for 30 days and then suddenly have an excuse not to pay. This is especially important for physical products… make sure they were actually delivered!
Find out who deals with payments and form a relationship with them. This builds upon the last point and is another way to keep your customer (or their employees) happy. It’s harder not to pay someone if you’re basically friends with them and speak frequently.
I know as an accountant in the past that I’d feel guilty if one of my more friendly customers was late being paid, and would put in extra effort to make sure they got paid on time.
If nothing else, make sure you have contact details for the right department ahead of time. It sucks getting passed around from person to person once it’s time to collect.
Make things automated. Sending out email reminders can be awkward, but it doesn’t have to be if you automate it. A number of online services will send out invoice reminders on your behalf automatically when invoices become overdue.
It won’t make sure payment is made, but at least it saves the time, hassle, and awkwardness of having to manually chase payments yourself.
When Should You Start Sending Emails?
Here are some key times that you might want to start emailing your customer to request payment. It makes sense to have a pre-made script for each email reminder. That way you can just insert the customer’s name and other details. Instead of having to write up a brand new email from scratch every time.
There are plenty of great free templates available online if you’re not sure what to say.
1 week before the invoice is due (optional.) Some people suggest doing this as a reminder. Personally I don’t, because I think it’s a bit pushy and annoying. I only start emailing once invoices are actually late.
The benefit of emailing early is that it lets customers know that you regularly track invoices, and you’ll be getting in touch if they don’t pay in time.
On the payment due date (optional.) Again I find this one a bit obnoxious and don’t do it myself. My clients already get an email from Paypal saying that they have an outstanding invoice and I feel like that’s enough of a prompt.
Personally I’d be annoyed if I always pay my invoices at 3 pm, but a vendor was constantly emailing me the morning that the invoice is due. It’s not technically overdue yet!
1 week after payment was due. Okay, now you’re getting into territory that I feel like it’s justified to start emailing. Don’t think you’re being rude. After all, if you delivered a good product that the customer is happy with, it’s only fair that they pay you. Still, you want to be polite but firm.
Include details like the invoice number, the amount due, and how many days overdue it is.
Make sure to offer them a copy of the invoice. If it’s their first offense, give them the benefit of the doubt. Even emails sometimes get lost, undelivered, or accidentally deleted.
2 weeks after payment was due. Now it’s time to start getting a bit more firm. Clearly ask for payment, and include a read receipt on your message so that you have proof that the client received it. If you have contact details for someone higher up like your normal contact’s department manager or the owner, I’d CC them on the message as well.
One month after payment was due. This is pretty much your last hope. At this point, you’ve sent multiple emails asking for payment. Either something is wrong with your invoice, the product, or the customer is actively avoiding paying you.
You still don’t want to make accusatory statements or get personal, as that will undermine your professionalism. But you want to take a bit tougher of an approach than you have previously, which might include mentioning interest charges or putting a stop on any future work until payment is received.
What If Email Reminders Don’t Work?
Pick up the phone. If you’ve emailed multiple times and still aren’t getting paid, it’s time to call the client. While emails are easy to avoid and put off, something about a phone call and having to answer to a real person puts a fire under customers with late payments.
It’s not a magic bullet, but it’s usually a lot more effective than email.
If you can’t bear the thought of calling and trying to be firm over the phone, you can hire a virtual assistant to do it for you. In fact, having someone else contact them for you can give more credibility and authority than just calling yourself as a small business owner.
Cut the client off. Make it clear that you won’t continue doing more work until the previous work has been paid for. This is really effective if the client relies on your products or services continually, assuming you still want to work with them.
In the accounting world we called this putting their account “on stop”, and nothing gets you a payment faster.
If this keeps happening over and over, you might want to just drop the client entirely. It’s hard to let potential earnings go, but sometimes it’s worth focusing your efforts on looking for new clients instead of constantly fighting to try and get blood from a stone.
Consider going to a collection agency, or having your lawyer send a letter. These are more costly options and probably not worth it for invoices with small dollar values. But if you have thousands of dollars outstanding, it’s an option you should absolutely consider.
A letter threatening to send your customer to collections is one way to send their accounting department into a panic because they’ll have to answer to higher-ups if things go any further and starts to affect the business’ credit.
Of course, assuming the client has money to pay and isn’t just intentionally withholding payment.
Get paid up front. This might be the best strategy to prevent late payments in the first place. Ask for payments upfront before you begin any work. Either being paid in full, or getting a 50% deposit. Not all clients will go for this because it requires trust on their part. But if you can get it, you’ll remove all the worry about having to collect payment later.
If I had a client who still wanted to work with me but was chronically late with their payments, I’d insist on getting paid up front
Conclusion
Asking your customers for payment can feel awkward and intimidating. But it shouldn’t have to!
Remember, you gave them a great product or service and deserve to be paid for your services rendered.
There are things you can do up front to avoid late payments later on.
That includes establishing your terms and expectations up front. You might even ask for full payment or a deposit up front if you’re really worried.
You’ll also want to invoice as promptly as possible, making sure to include a due date. And offering multiple clear payment options, including an online payment solution, to make paying as easy for your customer as possible.
You’ve learned when it’s time to start sending emails and what kind of details to include. As well as some extra steps you can take if you’re still not getting paid. Including making a phone call, stopping future work for the client, or even using a collections agency.
After reading this article you might be worried about doing business people at all! But you shouldn’t worry about it. The vast majority of your clients will pay on time, especially if you’ve carefully selected the people you do business with.
Listen to your gut and avoid anyone sketchy that you just don’t feel comfortable working with. After all, it’s your business!
But if you do run into any trouble getting paid in the future, hopefully these tips will help you to get paid.