Getting paid for services rendered is one of the most essential processes for every small business. By having some basic policies and practices in place from the point of first contact with new clients, you can get a better handle on managing client expectations — and getting paid on time!
Managing client expectations means spelling them out
Even the smallest of businesses need to create clear payment policies detailed within their service contracts. Then, don't just send the document to new clients and expect them to review.
Managing client expectations means taking the time to discuss this agreement with your clients — and that both sides have a signed copy.
Your payment terms can be whatever fits your business model. I've had those I mentor assume that 30 days is standard and customary.
You can most certainly shorten your payment cycle. It is your business after all!
Consistent communication — with detail
Clearly state your terms: Due Upon Receipt, Net 10 days, 30 days, etc. When it comes to managing client expectations, your contract should include the project scope, costs and clearly detail your procedure for getting paid.
Failing to be extremely clear on any of these points can create a gray area that can be an excuse to delay remittances.
Another option is to set payment milestones as various deliverables are met within the project cycle. As each milestone is reached, you then invoice — and the client is expected to remit before the project proceeds. No surprises there, because it is in writing and you've discussed the process!
Invoice promptly on the first of each month. Schedule follow ups at predetermined intervals. And be consistent in this process! This is important to set the precedent that you invoice on time and expect to be paid on time. Adding a note such as “Thank you in advance for your prompt payment!” supports the expectation that you plan on getting paid promptly.
Your invoices should be as detailed as possible, and note if a deposit is made and when the balance in full will be required. You want to provide all the essential and necessary information so managing client expectations doesn’t get in the way of a timely payment.
If your client requires any upfront paperwork from you, such as a purchase order, provide it promptly to avoid any additional delays.
Options, deposits, contacts
Offer multiple payment options to your clientele so they have choices. A combination of cash, checks, credit cards, direct deposit and online payment platforms works best.
It is not uncommon to ask for a deposit when projects exceed a certain amount.
Yes, you like getting the funds in advance, but deposits make sure clients have some skin in the game as well. You can define deposits based on the total project estimate. With the advent of mobile solutions you can request your deposit when you are with a client after they sign your contract.
If you are working with a large company with multiple contacts, managing client expectations is crucial. Verify your payment contact to ensure you are sending invoices to the person responsible for you getting paid.
Penalties and rewards
Penalties do not work as well as rewards when it comes to getting paid on time. However, while late payment penalties are negative reinforcement, they can be an effective deterrent.
Note in your terms of service either a flat fee or percentage that will be added to an invoice once it is past due. Then, note exactly when past due is. Again, discuss this with your client. Managing client expectations means they understand the ramifications of not meeting your agreed-upon terms.
If you prefer to avoid late fees, offer your clients the opportunity to take advantage of early-payment discounts. You could offer a five-percent discount if paid within two days (knowing that you have already baked that 5 percent into your fees).
Chasing your money isn't fun
Are you uncomfortable having to ask for payment? Fear of losing a customer by pressing for outstanding amounts due can be paralyzing. Especially when first starting out.
After being in business for some time you'll realize that your best customer relationships are with those who respect your time and relationship by paying you on time.
You'll also find that if a client lets payments slide once — and you are not on top of it — patterns can form. This is why managing client expectations is so important, especially a schedule for payment reminders. Then stick to it and be consistent!
Be firm but courteous when it's time to get paid. For example you could send a quick email once a payment is past due that simply states:
I was concerned when I noticed your March invoice has yet to be paid. Did you receive my invoice or do I need to send another copy? (Or for those who send checks, “...wanted to make sure the check was not lost in the mail.”) Please let me know at your earliest convenience.
You could also include links to your online payment processor so that remittances are only a click away. By sending a message such as the above you accomplish two important tasks:
- You remind your clients of their payment obligation that they agreed to.
- You remind clients that that you take timely payments seriously.
You've held up your end of the agreement — and now it is time for your clients to do the same and remit amounts due for services rendered. If email requests go unanswered, pick up the phone.
Managing client expectations matters
While all the above tips will help you with managing client expectations, nothing is more effective than having stellar relationships. Part of having a successful business is knowing how to foster solid, mutually respectful relationships.
These type of relationships garner respect for both sides — which includes timely payments for services rendered.
When you have strong relationships, follow-ups about past due payments tend to not have a negative impact on the relationship and might help to avoid the situation from happening in the first place.