Invoices are broken
For over 15 years I’ve worked in marketing agencies and, 3 years ago, I flew the nest and created my own. Invoicing itself isn’t a problem: it’s a good thing, as it means somebody owes us some money…! The real killer is getting those clients to pay their invoices in a timely fashion (if at all!).
I’ve worked in many roles within the industry – mainly as a Digital Designer, but as time went on I moved into roles such as Project Manager and New Business Manager which saw me creating estimates and proposals and, each month, I’d send out those dreaded invoices which I knew nobody was going to jump out of their seat and pay anytime soon… and the anxiety begins!
Guess what happened pretty much every time?…
…the client or their finance team would sit on the invoice for the entirety of the 30-day payment terms (this duration is madness in itself) and then they’d give me excuse after excuse, time after time. Sometimes, they’d miss the final deadline altogether then tell me they’ll get it sorted in their next payment cycle… not good enough!?
Even consistent and sharply-written reminders couldn’t get them to transfer that cash and let’s face it, most businesses don’t have a team of lawyers on hand to go shake it out of them. Plus, why would you want to alienate your own clients? It’s them who pay your bills, even if it may take them a long time.?
– What was wrong?
–?Had I upset them?
–?Was the work not good enough?
Let’s just say, it was seldom any of the above reasons.
Does this look right to you?
We’re not hungry now.
Why are we buying all this food?
Who can blame them?
If you’re providing payment terms that allows your clients to get something upfront with no-money-down, of course they are going to take their time with settling the balance. Wouldn’t you?
You’ve shipped the work, the client seems over the moon with the results and they’ve even asked you to rustle up a new proposal and estimate for further work – BUT WAIT – they haven’t paid their previous invoice!
This indicates you’ve done nothing wrong because they want some more!
Are they having trouble with cash-flow, then?
Maybe… but maybe not!
Take ownership. It’s not them, it’s you.
- You didn’t set robust terms of service.
- You haven’t been strict enough.
- You’ve not asked for the money upfront
- 30 days is too long!
- You’re working with the wrong type of clients
- You’ve been unclear with how and when you have to be paid
- You’ve not offered a straightforward payment method
- You’ve been too afraid to talk about money from day one.
- You forgot that you’re in the business of making money, not chasing money
1.? Be upfront with payment terms, budgets, pricing and money in general
You run a business, so act like it. When you go into a restaurant you take a look at the menu and regardless of how ambiguous the names of the dishes can be, you’ll see the prices, right there, next to each item you’re ordering.
Nobody likes to talk about money but that’s your number one concern as a business owner: how do I get the money out of their bank and into mine. Don’t be shy to talk about it right from the start, your customers will thank you for it.
There’s nothing more frustrating than not knowing price ranges upfront. Sure you can’t give an accurate price without digging in deep and doing some research, but you can at least prepare your clients with a minimum and maximum price range.
2. Provide a credit/debit card payment portal solution
This one is a game changer, many times your client doesn’t pay right away simply because of the friction that comes with settling the average invoice. Finding the weird little calculator that gives them a code to log onto their online banking, having their phone near by to receive that authorisation text that allows them to finally login, having to remember that darn password and second siblings younger brother’s maiden name. All seemingly small but enough to make them leave that invoice another week. Why not? Because they got the work upfront anyway.?
Nip this in the bud with an online payment portal, let’s say www.yourwebsite.com/invoices. Here your client can simply type in their card details, invoice number, and the amount they owe. Bish bash bosh. Invoice paid, and another task off their plate and out of their mind.
3. Bill & collect payments automatically
Where possible, you want predictable, recurring income for your business. Retainers, support contracts, maintenance agreements. Whatever you call them, this is your opportunity to reduce the invoice chasing and admin. Harness the power of online payment tools such as Stripe.com and GoCardless to setup recurring payments with your clients. This way, invoices, bills and receipts all get dealt with automatically. You only need to intervene if you receive a message from the system saying that payment has failed (insufficient funds etc).
The more customers you can have on an automated payment scheme the better. Less admin for you, money in the bank each month. It’s a no-brainer.
4. Ask for the money upfront
Believe it or not, you don’t have to collect payment once the work is over. It’s your business afterall. If you want your invoices to be paid upfront 100%, make that happen.
You may need to have a few more difficult conversations initially with new clients but once you establish this as your standard way of payment you’ll be able to run your business cashflow-positive and never have to chase an invoice for completed work ever again.
The control sits with you if they haven’t paid. You don’t start the work. This gives your client incentive to pay their invoices as quickly as they want the work to commence. Just as they would in a shop for a product.
I understand that this one is quite a big change, in my business we invoice any payment ￡1,000 or less upfront and our clients find that to be a fair request and helps us prioritise our work.
PS: You could also sell blocks of time upfront via an online form on your website.
5. Reduce your payment terms from 30 days to Zero
Zero-day payment terms are becoming more and more common, and I advocate it. Make every invoice you send from now on due upon receipt. Your clients will still take a few days to pay, maybe even a week. But never 30 days!
Don’t forget that you’re allowed to introduce penalties for late payments (as long as your client has signed some kind of agreement agreeing to these terms.) This leads me nicely to solution 6.
6. Ensure all clients sign a standard “terms of engagement”
If you do at least one thing when you onboard a new client, make sure you get them to sign a standard set of terms. You may be the fast-paced entreprenuer who doesn’t like red-tape, rules or contracts. But there’s one thing your future-self will thank you for and that’s having something down in writing that creates an agreement between you and your clients.
You don’t need anything fancy, just a few paragraphs that state payment terms, penalties, business hours, overages, rush-fees. You know. All those conversations you’ll have at some point anyway, you may never have to refer to this document again, but if push comes to shove, you’re covered! Your client has to pay their invoices, your client has to pay their penalties, your client has to wait for their work to be scheduled.
Need any help with implementing these processes in your business? Book a call with WD today.