What Can We Do If Our Invoices Are Not Paid on Time?
Sample Invoice Design
Image by Essl via Flickr

It’s an unfortunate fact of business life. Sometimes, clients don’t pay their invoices on time, and some may neglect to pay them entirely. There are things you can do to remedy this situation, however, so that you face it much less often than you otherwise might:

  • Always, always sign an agreement: Don’t ever start a project without having your client’s signature on the dotted line of an ironclad contract. The contract should spell out what both parties’ duties are; yours, of course, will include completing the project to specifications as spelled out in the contract, and your client agrees to pay the established price — with possible installments or provisions specific to the agreed price as well.
  • Ask for installment payments: Particularly if a project is large and is going to take some time, it’s very common for companies to request that their clients pay them in increments. For example, you can ask for 25% down, 25% additionally once the project is half done (with 50% of the total payment to date), 25% when 75% of the project is complete, and 25% upon completion.
  • Give clients bonuses when they pay invoices on time and penalties when they pay them late: Let’s say, for example, that you have a 30-day payment policy for the invoices you submit to clients. That is, clients who pay within 30 days of invoice submission are in good standing. However, perhaps you have clients who regularly push those invoice payments to 60 or even 90 days. (Again, those clients may actually end up not paying it all, which is why having a kill fee and incremental payments clause built into your contract with each client is a good idea). There’s a way to entice clients to pay their invoices on time or even early that’s relatively painless both for them and for you. For example, you can give clients a 2%, or even 5% discount on the entire project’s price (depending on your cushion, how much you charge, and how large the project is) if that client makes the final project payment within 10 days of receiving the invoice. At 30 days, clients are considered in good standing so that if they pay their invoice amount by that time, they don’t get a price break, but they don’t get charged extra, either. At 60 days, here’s where you can begin to penalize clients for late payments. If at 60 days a client has not paid his or her invoice, you can begin to charge 2% of the project price as a late fee. At 90 days, there’s an additional 2% for a total of 4%.

If that STILL doesn’t work

All of this assumes, of course, that you’ve kept in good communication with the client so that you know his or her particular situation and have tried your best to be reasonable, flexible, and fair. If all else fails and clients still have not made payment by the end of 60 days, as one deadline you might set, you can submit unpaid invoices to an outsourced credit control company. This company will follow up and make sure clients pay these invoices. These companies are professional and will provide you a necessary and valuable service as you can turn your attention to running your business. They not only help make sure you receive payments you are due, but they do so professionally and with courtesy, so that you don’t unnecessarily damage your relationship with your clients and remain in good standing with them.

Leave a Reply

Your email address will not be published. Required fields are marked *


Website Designed by Brookstone Creative Ltd.