A perennial problem faced by companies of all sizes is the issue of clients paying on time. Indeed, having problems with cash flow is one of the most common reasons for firms failing and can be one of the biggest stress-inducing factors in running a company.
If your firm perennially has problems getting clients to pay bills promptly, below are some tactics you could use to encourage timely remuneration and help minimise money issues.
Agree to a contract and set up milestone payments in advance
Taking a carrot and stick approach to your projects is one of the most successful ways to ensure your clients pay promptly. Rather than just working tirelessly at a job and waiting to be paid on completion, try insisting on interim payments to keep your client’s attention and force them to make payments based on project milestones.
Milestone payments can have several advantages for both you and your clients, including:
- From a client perspective, staged payments mean the total cost of a project is split into more manageable chunks that are less likely to negatively affect their cash flow.
- On the flip side, from your firm’s perspective, you’ll receive timely payments that can help spread the burden of your production costs. This has the knock-on effect that you won’t feel like money is only going out during a job and will let you handle ongoing expenses better.
Request a deposit
Similar to the above, requesting a deposit from clients will also help them spread the total cost of your work while also giving you both an incentive to keep meeting deadlines. These days, it’s perfectly acceptable in most industries to request between 30% and 50% upfront before starting a job. This also has the added benefit that you’ll have guaranteed money in the bank – regardless of whatever financial woes afflict your client during the lifetime of a contract.
Use a debt collection agency
In the worst-case scenarios where clients don’t stick to the milestone payments, then there are options available to you. You could use a debt collection agency that will enforce late payment legislation on those who owe you money. Click here to find out more about debt collection agencies and how they could help you reduce your stress levels.
Introduce a payment before delivery policy
Requesting a final payment before releasing a project can be a very effective way to ensure you get paid – however, it’s only practical with certain types of work. For example, if your firm installs kitchens or performs home repairs, there’s really no way of insisting payment on delivery as you’ll have already installed your work in the client’s home.
At the other end of the spectrum, if the majority of the work you do is completed in-house, it’s very easy to demand payment before delivery, e.g., a web design company producing a website can refuse to release it to the client until they pay in full for the work.
Make it easier for clients to pay you
It might sound obvious – and it might also be the oldest excuse in the book used by clients – but if you make it difficult for customers to pay you, you will undoubtedly encounter problems. You should accept as many payment methods as possible, including cash, cards, and electronic payments, to reduce the chances of clients saying they can’t pay you.