Why doesn’t my client pay on time? This is often the question of life and death for your small business. According to a U.S. Bank study, 82 percent of business failures are due to cash flow issues.
So, why don’t clients pay invoices on time?
For all sorts of reasons. Some are busy, some have bad support systems, some genuinely don’t have the money.
The good news is: mostly, the problem is with the invoice. Most people have the money but lack patience dealing with payments.
What to do when clients don’t pay on time?
We have spent years figuring out how to make clients pay on time. These tips are proven to work, and this is how we attained a 70 percent instant payment rate for our clients.
Unless your invoice recipients have serious cash flow problems themselves, these tips will help you get paid faster every time.
1. Send the invoice right away
Make sure you bill them while the memory of your great service is still fresh.
If possible, send the invoice together with the last deliverable. Additionally, sending your invoice early ensures that you get the money sooner, even if your client pays late.
2. Make payment terms shorter
If you need your money in four weeks, make payment terms two weeks. If you need it in two weeks, make the terms one week.
Unless you are working with a big organization with monthly billing cycles, this will still seem reasonable and provide extra time buffer in case they pay late.
3. Make sure you bill bigger clients on their cycle
When starting your partnership, ask your client about their billing cycle. If their accounting department pays bills once a month on the 15th, make sure you invoice them monthly around the 10th.
4. Make your invoice short and clear
An average person receives 116 business emails daily. As soon as your recipient thinks, “This is too hard—I’ll do it later,” you’ve lost them.
Eighty percent of inboxes have between 72 and 21,000 items. If your invoice is not simple enough to process in one to two minutes, their “later” will likely become “never.”
5. Make it easy to pay on mobile
So, you want your client to pay the invoice right when they open it. More than half of emails are first opened on a mobile device. This means a good invoice will not make them copy-paste information from PDFs, fill out long forms, or deal with special file formats. Ideally, it will be a short link or button saying “Pay here,” like Amazon’s “Buy in one click.”
Another feature that has proven to work well on mobile are SMS invoices. Research seems to suggest that, on average, SMS is more engaging than email. For invoices, SMS is great as there is typically less clutter in recipients’ SMS than email, also there is a stronger tendency to deal with SMS right away.
6. Make sure it is easy to forward
How many invoices were not paid because a busy boss opened the email on their iPhone and forwarded it to accounting without the attachment while deleting their version?
First, your invoice should have been sent to accounting in the first place. Second, it should still be easy to forward.
This means that in addition to the attachment, you should have a link leading to the invoice in your email text. Even if the recipient does not forward the attachment, the link still stays.
7. Charge automatically whenever possible
It is hard to forget a payment that is deducted automatically. Do everything possible to encourage clients that consistently buy the same service to opt for an automatic subscription.
Be sure to incentivize this wherever possible, to encourage clients to opt in. This could mean offering discounts or other relevant perks to your automatic billing subscribers.
8. Send consistent, friendly reminders
Always assume the best about your client, unless proven otherwise.
If they haven’t paid your invoice, assume they simply forgot. Send them a friendly regular reminder, with no more than one to two sentences, until they have paid.
9. Make it easy to ask a question
“I don’t understand this invoice! What is it for?”
Your client may have forgotten about your invoice—and there is no way for your client to find out more if your invoice was sent from a no-reply email address. They will just ignore or delete it as spam and proceed with their day.
So, to make it easy for them to contact you with questions.
Together with a solid understanding of cash flow, you’ll be able to avoid common pitfalls and be ahead of the crowd.
Originally published on Feb 14, 2017 as a guest post on Bplans.com .