Why don’t clients pay on time? It could be for any number of reasons, invoice got lost in a stack of papers, or someone forgot to log the invoice into the system. One of my favorite quotes is Hanlon’s Razor (modified):
Never attribute to malice what can be explained by laziness.
Most of the reasons are innocent or at least not nefarious, right? So what is the best way to collect payment while preserving our relationship with our clients?
First, start by remembering that you like the person on the other end of the phone… I know, I know, you’re thinking well that’s really obvious. But, sometimes we start out the conversation prepared for a fight, because it has to do with money. When 99% of the time that’s probably not necessary and might even get us off on the wrong foot for future projects or purchases with that client.
Here are my 5 steps to collecting payment and keeping your clients, happy clients.
1. Check in and re-send the invoice. In many cases just sending a friendly follow-up email reminding them that payment is due by XX date, or was due on XX date will do the trick. I try to email within three days of the due date, either before or after.
2. Double check your file If you didn’t hear back from your follow-up email, or you did, but still didn’t receive payment within 10 days (unless they notified you of a specific timeline for payment). Do the following:
· Look back and review that the invoice was sent on time.
· Who sent the invoice from your office and who in your client’s office received it? Is it the right person?
· Confirm that everything about the order was shipped or completed per the client’s request.
If any of these things weren’t fulfilled correctly, you may have your answer as to why payment wasn’t received, and either way see below…
3. Reach out. If something went wrong: If no one has contacted your client yet, now would be a great time to call and make sure everything has been corrected and they are happy with the transaction on their end.
At the end of the conversation you should be able to re-send the invoice, or know what steps are needed and set a reminder or make a note to send the invoice with whatever corrections need to be made from your end.
If everything in your file looks correct: Grab the phone and check in on them. Ask about the order in question, and make sure they were satisfied with the product or service they received. When they confirm, it’s a really easy transition to ‘oh good, I’m so glad! We haven’t received payment yet, and I just wanted to make sure you were happy and we weren’t missing anything on our end.’ This is usually followed up by the client with something similar to ‘Oh crap we’ll get that check cut today or tomorrow.’
Before I hang up, so they don’t think I’m payment stalking them (which I am), I always tell them I’m going to re-send them the invoice so they don’t have to go digging around for it… I’m being helpful and ensuring the dog ate my homework story only worked the first time.
4. The Ultimatum – Last chance for a happy client. The ultimatum works best if you have an ongoing service contract or they purchase from you on a regular basis. This is almost a last resort, (as is Step 5) we’re all in the customer service business and no one wants to lose clients. But, if you continue to get blown off, if no one has raised any issues and they are simply not paying and not communicating. Send them a copy of your contract, reminding them of their payment terms, and set a specific date when services or deliveries will be cut off. Assuming they continue to see your value, and they don’t want to have to find another vendor or provider you’ll hear from them soon.
Ultimatum Note: If it took you to ultimatum to get payment, and they didn’t communicate or were unwilling to work with you by sending payments or making other arrangements, it’s time to review payment terms for that client. Mandatory down payments and written payment plans may be in their future.
5. The end of reasoning. If you have made repeated attempts to collect payment depending on the size of the account, you might be considering writing off the balance or selling the debt to a collection agency.
However, if you were staying in touch with your client and you clearly define payment terms from the start, hopefully you don’t ever get to step four, let alone step five.
Bonus tips for receiving payment on time:
Send clear invoices. Your invoices should clearly outline the work or products provided, the agreed up on payment terms, payment instructions, payment due date and the total amount due. All should be clearly legible and easy to find on the page.
Send invoices right away. With so much on your plate, and your clients, it should be a part of your process to send the invoice at the same time that products are shipped or work is completed. Not receiving an invoice is a really good reason that payment wasn’t made. A reminder should also be set immediately after sending the invoice to follow-up for payment if it hasn’t been received by the due date, or aging receivables reports should be ran weekly to make sure accounts aren’t falling through the cracks.
Follow-up persistently. Let them make no mistake that you are serious about receiving payment for the work you do, as you should be. That doesn’t mean you need to be aggressive, you just don’t need to stop either. Your work and products require payment, and you don’t let it go.