Encouraging Clients To Pay

posted by Andrea | 05/5/2012

One of the hardest parts of running a business (at least for me) is deciding what I’m going to charge for my services… and then making sure I actually receive payment for those services.

I don’t want to seem greedy or money-hungry — but at the same time, I’m not willing to work for free. As many of you know, there are lots of expenses involved in running a business, so it’s essential we receive timely payments from our clients.

If you’ve ever struggled with clients who won’t pay, here are a few ideas to help you collect those payments — and prevent future problems.

Make it really easy for them to pay.

Even though PayPal takes a small fee, it’s often the best payment option for many small businesses because it is safe, secure, well-know, and fast. Plus, they accept all major credit cards, debit cards, and work with most banks, so it’s really easy for your clients to pay.

State your payment terms clearly.

Before you even enter into a working partnership with a client, make sure you are BOTH clear about the fees charged and your payment terms.

Will you charge any mileage fees, tax, shipping, handling, etc? From the client’s perspective, it’s really annoying to have all sorts of unexpected fees tacked on to their bill.

When do you expect them to pay? Will they pay immediately once the goods/services are received? Will you bill them at specified intervals? Will you require a full or partial pre-payment?

Go over all these details with your clients and include your payment policy in a Client Agreement Form that both you and your clients sign before doing business together.

Require pre-payment.

I don’t require pre-payment for all of my services, but I do require a full pre-payment for all my coaching services.

I have found that most clients don’t think twice about a pre-payment (or partial pre-payment) and it’s a nice security net for business owners.

Invoice promptly after the goods/services are provided.

Don’t allow too much time to lapse before you send out your invoices. I like to do mine on a weekly basis just so I stay on top of things and don’t forget.

Plus if you wait too long, there’s the possibility that the client will forget — or even change locations.

Offer a discount/reward for clients who pay in full.

Depending on the type of products and services you provide, you might want to try offering a small discount or an extra reward for clients who pay up front and pay in full.

Even though you’ll take a small hit financially, you’ll save so much time — plus that money will be available for other uses several weeks or even months in advance.

Establish a follow-up procedure.

Hopefully you won’t have to use this procedure, but it’s good to have one set up just in case.

How long will you wait until resending the invoice? Will you contact them by phone, email, letter? Will you send the issue to a collection agency if necessary? Do you even know who to contact if you need to contact a collection agency?

Money is always a tricky subject for small business owners — especially if you’re doing business with friends and family — but by keeping everything professional and using a few of these tips, you’ll hopefully be able to avoid many issues and promptly receive your payments.

Have you ever had a client who refused to pay? How did you deal with it?

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4 comments

  1. Jennifer @ work home balance

    05/05/2012

    I taught piano lessons for 13 years and all my students were friends. Although payments were due at the beginning of the month, I still had a few people that would forget to pay. I finally had to send messages home with my students saying that I had charged their books on my credit card and my bill was due. That always worked.

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  2. Jen

    05/05/2012

    I’m a WAHM (freelance writer) and so far I’ve been pretty lucky. I did have one non-compliant client (new band name?) several years ago, but ultimately pursuing what she owed me would have cost me more financially and mentally than it was worth, so I walked away. Her venture sank soon after, anyway.

    I have to be careful about not becoming too chummy with my clients. I’m naturally pretty friendly and outgoing, and it takes very little for me to sort of “bond” with people. The problem with that is that it makes it harder to switch into “business mode” when the time comes to renegotiate rates or collect payment. I actively try to keep a friendly-but-businesslike demeanor, but I still find sometimes that I’ve let my professional guard down more than I’d like.

    I imagine that could be a challenge for you, too, Andrea, because when you write this kind of blog it’s very easy for people to feel like they “know” you. I’d love to hear your thoughts on that. I know you’ve done a post or two about people writing and essentially requesting free services, but if you ever decide to expand on the challenges of keeping an “open book” sort of blog and maintaining professional distance, I’d be very interested to read about it. :)

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  3. ShannonP

    05/05/2012

    I did a bunch of subcontracting legal transcription work for someone over the summer a few years ago. Everything was going great and I was paid as agreed for the first two months. Then, she started stopped paying and started feeding me (and a group of other subcontractors) a bunch of different stories about the money was held up, yada, yada, yada. She never did pay. I published a Rip Off report about it, as did others, and we all sent her to collections. As far as I know, no one ever saw a dime. She kept switching email addresses and phone numbers. At the time that she was feeding us all sob stories about why she couldn’t pay, she went on a trip to Las Vegas.

    It has been almost four years. Collections were never able to get anything out of her. Another friend was able to get a small claims court judgement against her, but I don’t know if she ever saw her money, either. Small claims courts work different in different states. In WA state, you are supposed to go the state of the non-payer to get a judgement. I would have spent more flying to Florida and getting a hotel, food, missed work, etc, than the $600 she owed me.

    Since that experience, I always require a deposit up front equal to roughly 25% of the projected final total. Once a transcript is complete, I invoice via PayPal and when they pay, I release the transcript. So far, no one has had a problem with it.

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  4. Patty@homemakersdaily.com

    05/05/2012

    My husband is a self-employed remodeling contractor and we’ve been very fortunate to only have a few problems in the past 26 years. One was with a customer who not only refused to pay him a month’s worth of wages plus materials, she actually turned him in to her insurance company saying he had caused damage. We had a telephone conference with the insurance company and my husband explained that he hadn’t even worked in the rooms she was accusing him of damaging. They dropped the whole thing realizing we weren’t the problem – SHE WAS. Apparently she filed claims about other contractors working on her house, too. One of her strategies was to nit pick the contractors until they reduced their prices and falsely accuse them of damaging things and making them pay. She was a HORRIBLE woman. Fortunately she’s the only one we’ve had like that.

    We have had a lot of trouble with corporate clients. They pay – but they pay really slow. Usually it takes 90 days and a monthly reminder. I have considered adding a late fee to each invoice but haven’t done it yet. They wouldn’t hesitate to charge me a late fee so why shouldn’t I.

    Most of our customers pay the day the job is finished or mail a check. We’ve learned that if we don’t get a check right away, it means they forgot and we have to call and remind them. My husband is friendly with his customers, like Jen above, so it’s hard to make that call.

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