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You’ve done the work, completed the project, provided the goods, and now you’re ready to invoice your client… so how do you want your customer to pay you? This is largely up to you, but it’s useful to think about what’s convenient for your clients, too. After all, the easier it is for them to pay their invoices, the better your chances of getting the money in sooner – which is good news for your cash flow!
There are countless payment methods that you can include as an option on client invoices, such as:
Ensuring your clients can use their preferred method to pay you certainly has its advantages. Making it as simple for someone to send an invoice payment means they’re less likely to put it off, reducing the time and effort you put might otherwise need to put into chasing overdue invoices. Other positives can include:
Some payment handling platforms charge a subscription, so having a wider array of these might prove more expensive than necessary – especially if they’re only used occasionally. Lots of payment options can also result in needing to spend more time collating payment information into your bookkeeping. Offering tons of options for the sake of it might not necessarily be the best approach in that case.
It’s also important to keep your payment process as streamlined as possible. A daunting array of choice can put some people off – leading to those delays we want to avoid.
Again, this depends on what you and your customers are comfortable with, but there may be other considerations too – such as the industry that you work in, or the kind of projects you’ll be involved with. For example, you might ask your client for:
The work is done and now you’re just waiting to be paid. But as the days go past, the silence from your customer is deafening and the uneasiness starts to grow. Late payments and trade debtors can bring big headaches for small businesses, but there are things that might help mitigate the risk, and deal with it if it does happen.
A good relationship between your business and your customers goes a long way. It can keep communication flowing if they run into difficulties and builds trust. You also stand a better chance of spotting any potential issues before they arise. Regularly reviewing your debtor report will help you understand what they’re really like to do business with!
Setting out invoice payment terms clearly, from the beginning, can go a long way towards minimising any awkward conversations in the future. You’ll know when to reasonably expect the payment, which is essential for financial planning, and means you can send pre-emptive payment reminders leading up to the deadline (and possibly more sternly worded ones after it!). You might also consider:
For longer contracts you might consider setting a payment schedule to improve cash flow for all involved, allowing your customer to spread the bill across a series of payments, whilst giving you regular income rather than waiting for payment on completion.
Whatever it looks like for your business, get your invoicing and payment terms set in stone early so everyone knows where they stand.
When you’re sending out lots of different invoices regularly, it’s easy to make a mistake. Accurate invoices stand much more chance of being processed quickly, but errors can cost you serious time and money.
Check and double check each invoice thoroughly before sending. Make sure the correct bank details are on there, as well as a breakdown of the work that has been completed (or products supplied).
The more detail you can give on your invoices the better, but accuracy really is key. And of course, make sure you are sending your invoice to the correct person within the business you’re sending it to. Otherwise, you risk it ‘going round the houses’ which tends to delay payment even more. And don’t forget to mention the payment methods you accept!
Get in touch with your client in writing to tell them you will be looking to charge interest on the outstanding payment, as per your statutory right. This interest may be set up to 8% over the Bank of England base rate. You may also seek compensation relating to debt recovery costs under Late Payment legislation. Make sure they are clear that unless payment is made immediately you will be taking legal action where necessary.
If they still don’t pay, stop any further work for them until payment has been made. Your work (or service/product) will likely be valuable to them, and they may not want to lose your support.
Think about the commercial reality. If your client has no available funds or is insolvent, further action probably won’t help. Again, if you’re aware that severe financial difficulties or insolvency are at play, seek legal advice.
Your customer still isn’t paying, and the payment deadline has long passed. Now what? This might be the point where you consider taking legal advice so you can plan what route to take next.
If the amount owed is particularly large, or you’re worried the customer will struggle to pay at all, you need a procedure in place to follow. This will also help you stay consistent if the problem ever arises again!
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