We have three words that can instill fear into any business owner: slow-paying clients. Slow-paying clients or, worse, no-pay clients can wreak havoc on your business’s finances. Small businesses are especially susceptible to doom due to slow-paying clients as they often rely on receiving invoices to afford payroll and overhead costs.
If this sounds familiar, you have options. The best case scenario would be that your clients hand you a credit card number the same day that you send the invoice, but we know that this is far from reality. Instead, you can take steps to encourage early or on-time payments and understand what your options are when this doesn’t happen. Keep reading to learn how to encourage on-time invoice payments and learn how The Commercial Finance Group can provide invoice factoring for small businesses to fill in the gaps.
How To Get Clients To Pay Invoices On Time
- Incentivize Clients To Pay Early: Offering a small percentage discount for clients who pay early, say, within 10 business days of receiving the invoice, can encourage them to pay up sooner rather than later. Obviously, you want to be paid the full amount for your services when possible. However, when the option is to either lose 1 to 2 percent of a sale upfront or wait for several months to see if a client will pay, you would most often prefer the former. If your clients still are not incentivized to pay early, an invoice factoring company can provide a similar solution.
- Write Late Payment Fees Into Your Contract: Ensuring you have an ironclad contract with your client is always important. If your client isn’t interested in saving some money by paying early, perhaps they’ll be encouraged to pay on time if they know they’ll incur late fees if they don’t. Don’t be afraid to include a small percentage-based late fee into your contract. You can have a flat late fee or a late fee that increases every week that the payment is missing.
- Send Invoices Immediately: Many businesses will send out all of their invoices at the end of the month. By the time your client gets your invoice, you’ve likely left their mind. Send invoices as soon as possible. Most businesses prefer receiving emailed invoices these days, but you can send a paper copy as a backup if necessary.
- Be Direct: Many invoices contain the words “Due Upon Receipt.” This leaves too much leeway for your clients. Instead, include an actual due date or the number of days you are allowing for your client to pay. This creates a firmer payment window and can help you get your money faster.
- Make Payments Easy: Most clients will prefer to pay with a credit or debit card or through direct deposit as opposed to mailing a check or sending cash. Allow clients to pay online. Depending on the scope of your business, this can be done through something as simple as PayPal, or you might need to use an invoicing software for larger payments. An invoicing software will make yours, and your client’s, job easier by streamlining the invoicing and payment process.
- Send Reminder Emails: A gentle follow up email never hurt anyone. Rather than twiddling your thumbs for 90 days hoping that your client will pay, send incremental reminders. There is a thin line between being proactive and nagging your client and you might need to decide how many reminders to send out on a client-by-client basis. Usually, an email five business days before the due date and on the day that a payment is due, as well as another if the payment is late, will suffice.
- Stop Work If Account Is Past Due: This is the tough but fair situation that you don’t want to find yourself in. However, if you are currently performing work for a client and they fail to pay for that work within the agreed upon time frame, it is often best to send a notification of work cessation until the issue is resolved. Be sure this is clearly stated in your contract and follow through.
Know Your Options For Invoice Factoring
It can be tempting to take legal action or fire a client if they are late to pay. However, you must weigh the pros and cons of this action. If it is a large client, can your company survive without them? Will they tell others in the industry that your business is nothing but trouble for having the audacity to suggest that they pay their bills on time? We hope you sensed the sarcasm in that last one.
If you are working with a problematic client, consider using the services of a factoring company like The Commercial Finance Group. We can take over the hassle of collecting invoice payments and you can receive a large portion of the money you are owed immediately. This can help solve cash flow problems your business might be facing without taking out a loan.
Learn More About Invoice Factoring For Small Businesses
We are one of the most experienced invoice factoring companies in Atlanta and offer a combined 250 years of experience among our team. We provide invoice factoring to help solve cash flow problems without taking out business loans. Get in touch to learn more about this service and if it is right for your business and discover more unique small business lending solutions from The Commercial Finance Group.
