Cashflow is vital, especially if you’re self-employed. At some point, everyone will be faced with a client that pays their bills late, or not at all. It can have a huge effect on your finances, especially if you’re owed a substantial amount of money.
But how do you deal with these situations?
Have A Process In Place
A defined process in place for invoicing and following up on overdue invoices. From the initial invoice right the way through to legal action, you need to know your course of action at every step. If you don’t have a law firm that you can use for debt collection, then ask for referrals from other freelancers or head over to Fleeson.com who may be able to help you.
Build Great Client Relationships
Even though your relationship might be professional, building a strong, friendly relationship with your client is good for business in a lot of different ways. Not only will your working relationship improve, but you’re more likely to get paid on time too. You will become important to your client, not just a name on an invoice.
Include Payment Terms In Your Contracts
Be clear at the outset about your payment terms and any late fees that are applicable. Don’t bury them in the rest of the terms, make them stand out.
By doing this you will be setting expectations at the outset and also drawing their attention to any potential differences for their standard supplier terms.
Use An Automated Invoicing System
There are many accounting and invoicing systems on the market. Once you start using one of them, you’ll wonder how you managed without it. Not only can you use it to keep your accounting up to date, but you can also use it to automate your billing, reminders, and payments. Giving clients the ability to pay you directly from the invoice, through PayPal or card payment gateway can avoid the lengthy accounting/bank transfer process. Do some research to billing platforms like Bill forward to find a billing platform that drives growth.
Having automated billing and follow-ups can shave days off your billing cycles. No longer waiting until you have the time to get around to your invoicing, or checking your bank account to find payments. Saving a day here and there can really make a difference to your cash flow.
It is becoming more common for freelancers to invoice all or part of their fees upfront. By doing this, you will be getting the money in advance, giving you a much healthier cash flow.
It is especially helpful to do this for new clients. Because you haven’t done business with them before, you don’t know how reliable they are at paying their bills.
Learn To Recognize Red Flags
As you become more experienced, you will begin to spot the signs that a potential client may not be the best fit for you. For example, if they are always trying to drive down the price to an unreasonable level, or complain that your prices are too high, they may become squeamish when it comes to paying their bills too.
Everyone wants to get paid in full and on time. Unfortunately, though, that doesn’t always happen. By getting your processes in place and automating your entire invoicing system, you give yourself the very best chance of reducing your unpaid invoices.