How can you run your business if you constantly have to work around past due invoices?
As a freelancer, it’s essential to get paid on time. When a client is late with a payment, you can’t pay yourself. Some months, that means you’re late paying rent, and you’re financially paralyzed until payment comes in.
That cash flow stress is responsible for a majority of freelancers walking away from the entrepreneurial life. On a larger scale, late payments cost small businesses $3 billion every year.
You don’t have to be one of them. You just have to learn how to manage cash flow and do everything you can to get paid by your clients on time.
Read on to learn how to deal with your client’s past-due invoices.
Leave Your Emotions at the Door
Let’s face it, there are lots of emotions tied to money. When you need to get paid so you can pay your rent and other bills, your stress levels are high. You may have to hold off on a company investment or hiring a new employee.
As upset as you may be, you need to leave your emotions out of the collections process. You don’t want to be in a situation where you’re overly emotional with a client – and they react in a negative way.
If you’re upset about the situation, take a walk and a few deep breaths before sending an email or calling the client. Be calm yet firm in your demeanor.
Follow Up with Email First
There can be many reasons why a client is late with the payment. They might be waiting on payment from another customer. They may have lost track of the date, or they’re involved in another project.
Send your client a carefully worded email as a reminder that the invoice is overdue. Most of the time, clients will take care of it right away.
Unfortunately, there’s always one client who will try to brush you off for payment for one reason or another.
If you don’t get a response after a few days, follow up with a phone call.
Always Ask This One Question
When you do get a response from a client, there’s one question you must ask to hold them accountable. Clients will say that they’ll take care of it, and you trust that they will. However, you’re also leaving it up to them to pay you at their convenience.
That’s why you need to get your clients to commit to sending payment. When you get a response from a client, always ask “When can I expect to receive payment?”
That question is professional, and it forces them to commit to paying you by a certain date.
Make It Easy for Clients to Pay You
When you’re dealing with past due invoices, you want to make it easy for clients to pay you. If you only accept checks, you may have to wait for multiple people to cut a check for you.
If you accept credit cards, a client can pay you immediately.
Set Expectations Early in the Customer Relationship
Once you collect the funds owed to you, how can you prevent the process from repeating itself over and over?
Start by setting expectations early on in the client relationship. Getting new clients is very exciting for freelancers, but if the clients don’t pay, you’re essentially working for free.
To prevent that scenario, have an on-boarding document for your clients. It could be a formal contract or a line in your proposal.
The document should include when the customer will be invoiced, when payment is due, and when you’ll deliver your services. It can also mention any additional fees or penalties if they’re over 15 days late with the payment. That’s up to you.
Take the time to go over this with the client. By having this conversation with them now, you’re setting yourself up for a better relationship with the client. They won’t be surprised when you charge a late payment fee.
Also, ask them who you should contact in case there are any billing issues. This is important to know when working with larger organizations where multiple people can handle accounts payable.
You want to know who the main point of contact is – and develop a relationship with that person. They’ll be more inclined to help when you really need to get paid.
Have a System and Stick with It
As a freelancer, you already have a lot to juggle. You have client work, business development, and administrative work to keep your business running.
Chasing down clients for payment is not fun, but there are things you can do to make the process easier.
Developing a system is important in keeping those expectations with your clients. If you bill them when you have a chance, they’re going to pay you when they have a chance.
Invoice your customers on the same days every month. For clients who get billed at different times of the month, you can invoice them on the 1st and the 15th.
With an easy to use an invoicing system, the invoicing process will only take a small amount of your time.
You can then have a system in place to contact them when they’re late with payments. For example, email them when they’re five days late, call when they’re ten days late, and make a follow-up call 15 days later.
When your freelancing business is large enough, you can hand these tasks off to someone else.
Get Paid on Past Due Invoices
Collecting past due invoices can be one of the biggest challenges for freelancers. It has the potential to impact just about everything in your life.
There are measures you can take with your clients to get them to pay you when they’re late. There are also things you can do to set client expectations early on in the relationship.
The key is to have a system in place, and that includes the invoicing software you use. When you use Sighted, you can easily create invoices and make it easy for clients to pay you right away. Sign up for your free account today.