It’s a great feeling. You’ve done the work, sent the invoice quickly, the client pays and you’re on top of the cash flow. Running a business is a dream…..
Except when you get the odd client who doesn’t pay quite so quickly. Your bills start to mount up as you wait and wait and wait. Chasing money can feel toe curlingly embarrassing but you need paying. It’s an irritating but routine part of running a business. So how do you deal with a late payer whilst not upsetting your client? You simply need a process.
So, what is the process?
Firstly, make sure you have a great invoicing process in place. Check out our article on ’How to Make Invoicing a Piece of Cake’ if you haven’t already got this sorted.
When you raise invoices make sure you establish a payment date and state it clearly on the invoice.
A good accounting package will allow you to pull up a report in seconds that shows who owes money and how long it’s been outstanding. As soon as the payment date has been passed it will show as overdue. Ideally you should review this report each week.
Armed with your report, you can send a statement to your client with a friendly email mentioning the invoice(s) that are overdue. This is usually a good prompt for payment although emails are easy to ignore.
If issuing a statement didn’t do the trick your next step, say a week later is to call the client. You may feel uncomfortable discussing money with your client, but it is often the best way to chase payment – it’s harder to avoid someone on the phone. Keep it friendly and non-confrontational. If it’s an accounts department you are dealing with, try and build a rapport with them. They’ll remember you and are more likely to be helpful. If you really struggle with having these conversations ask someone in your team to make the call for you and give them a script to follow.
If a client is in financial difficulty it may be necessary to agree an installment plan. It is better to be paid over a longer period than not at all.
Hopefully by this point your processes have got that invoice paid and you can relax. Obviously, there are times when an invoice won’t get paid despite your best efforts and you’ll need to decide whether to take further action or to write it off as a bad debt. But that’s a different post altogether.
Having a process that you follow diligently makes chasing for money easier and using scripts helps to keep any emotion out of the conversation.
How to Completely Avoid Chasing Money
The secret to avoiding having any debts at all, is to get paid up front for the work you do. This is becoming more common in many industries, although it is more difficult if your clients are larger Companies.
You can also make sure you are in control of when payments are made from your regular clients by using systems such as Go-Cardless which allows you to collect Direct Debits. Much better than waiting for a client to set up a regular standing order. It also makes life easier for clients as it is one less ting they have to do.
If you need help establishing a credit control process or setting up payment processes let us know.