Reducing Late Payments from Clients
Billing clients can be one of the most unpleasant parts of running a business. However, it is essential if you hope to make a living as a freelancer. One of the biggest hassles can be dealing with clients that pay invoices late. It is a good idea to have a system in place beforehand to encourage them to pay on time. Here are some things that you will want to do.
Create a Clear Billing Agreement With Your Clients
You want to make sure that you understand the clients understand the terms of your billing agreement. Make sure that your contract clearly stipulates the billing policies. Only about one in twenty businesses takes that time to establish billing terms for their clients, which is one of the reasons that they have trouble getting their clients to pay. Here are some things that you will want to include in it:
- The timeframe they are given to pay for their services after they are rendered.
- Any late penalties that will need to be paid.
- Stipulations that they will be liable for legal fees if you need to take them to court.
Clients donâ€™t generally fail to pay their bills on time because they are dishonest. They usually become distracted running their own businesses and put things off that donâ€™t seem like an urgent priority. It is easier for them to do so if they arenâ€™t clear on the expectations. You will need to make sure they understand what your terms are to ensure they pay your invoices in a timely manner.
If they donâ€™t pay their bills on time, then at least you will have a clear contract that allows you to seek restitution against them in court. Fortunately, it wonâ€™t usually come to that if the contract is written properly.
It is also a good idea to remind your clients of the original contract every time that you send them an invoice. You can create your invoices online at aynax.com and include your billing terms before sending them over.
Require Initial Deposits or Retainers
It is always a good idea to weed out deadbeat customers before doing business with them. One of the best ways to do so is by requiring deposits before doing any business.
You should be wary about doing any work with a business that cannot make a payment upfront. That is a good indication that they do not have the means to pay for the service at all. Also, if a company does fail to make payment after the completion of a project, then you will at least be able to keep their deposit to offset some of the expenses that you incurred working with them.
Retainers are particularly common with lawyers and other professions where clients would otherwise be highly likely to flake on paying their bills. A lawyer may charge $900 for a retainer, but you can charge less if you have a lower standard rate. A good rule of thumb is to multiply your standard hourly rate by four.
Create a Payment Schedule for Longer Projects
It is always a good idea to create a payment schedule for longer projects. There are a couple of reasons to set one up:
- Clients will have an easier time paying invoices if they are billed in smaller increments. You shouldnâ€™t expect them to budget their money properly and be able to pay a large lump sum of money at the end of the project.
- If a client isnâ€™t going to pay their bills, then it is a good idea to know that after working on the project for a brief period of time. You will want to cut your losses before committing six months to a year working on a project for them.
You can either bill your client on a regular basis (i.e. once a month) or after each milestone. You can decide which system works best for you.