For many small businesses, cash flow is essential. That means getting paid on time so that you’re not facing overdraft charges, or are unable to pay crucial bills on a regular basis.
Not only does this cause hassle that you have to deal with, meaning time-out from your business, but it can also impinge on your ability to get future finance from your bank or building society. And that’s not good for the long-term picture as far as your business is concerned. As a result, we’ve listed five ways right here that you can make sure that money continues flowing into your bank account:
Make payment terms clear in the contract
As well as clearly listing the cost of the job, deliverables and payment structure (including when you expect to be paid) in your contract, you should also mention late payment fees and when they apply ie after 30 days. That way most clients will be sure to pay on time. In terms of how much of a late payment fee to charge, the government advises eight per cent over the Bank of England base rate.
Ask for a deposit
If the contract is for a large amount then ask to be paid a deposit of 30 to 50 per cent upfront. Or, you could ask for payment after certain milestones have been delivered – rather than getting a lump sum at the end. That’s because if the job is ongoing then the client is more likely to pay at intervals, knowing they’re expecting further work from you and won’t get it unless they do their part.
Send the invoice at the job’s completion
With other deadlines on the go, it’s easy to let writing and sending an invoice slip a week or two. Not only does this look a bit shoddy ie you’re not keeping on top of things, but it’s also going to affect your cashflow. It’s far better to get into the habit of viewing sending the invoice as part of the job, therefore immediately after it’s been completed and signed off.
Be the perfect company
Nurture your clients. For example, send them a card and maybe a gift at Christmas, but essentially get their job done on time and go above and beyond. By that we mean make it hard for them not to pay you straight away because you’ve done such a thorough job.
Use software reminders
Like it or loathe it, technology definitely has its part to play in making our businesses run smoother. For instance, it’s possible these days to buy software that allows you to send out customised invoices from your phone, laptop, desktop etc and will send payment reminders to clients after a certain date.
If your client repeatedly dodges your phone calls, ignores emails and generally pretends you don’t exist, then you can take further action to get paid. You could, for example, threaten them with court action (there is a process to keep within the law). Nine times out of ten you’ll find that’s often enough to get them to instantly remember you and pay up!