You’ve won the bid for client work and now it’s time to get paid. No matter how valuable your business’s contribution is to your clients, collecting payment can be a challenge. Although both parties have agreed on the work and the price, financial stigma still rears its ugly head. Additionally, the confrontative nature of collecting payments may incite may go against an individual’s comfort level.
However, your business’s success and viability rely on your ability to invoice and collect timely payments from its customers. Thankfully, you don’t need to start knocking on doors to improve your on-time and even early payment rates. Updating your invoicing process and accounting practices can significantly improve your cash flow.
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1. Make Your Payment Terms Clear and Contractual
When you draft your bid for client work, put your payment terms and rates upfront. Many organizations include caveats in their contracts that may indicate greater flexibility than is accurate. Err on the side of caution and offer greater detail on how client work is bid. Outline the process for adding, subtracting, and paying for agreed-upon services.
For example, a specialty contractor will likely require materials to begin work. Payment terms for this type of work may necessitate a deposit to help cover material costs and project design. Before work can begin, establish when payments are due and require an automatic payment method upfront. This may be a credit card that’s kept on file securely or an ACH connection. For clients preferring cash payment, coordinate timely payment with your sales representative and track payments in your project management protocol.
Embed these milestones in your accounting software to help projects stay on time and prioritize work based on payment status. Late payments may result in work stoppage and cause costly delays, especially if your business is weather-dependent. Consider these scenarios in your contract agreements, and how late payments can disrupt your project scheduling. This may result in fees and penalties for delinquent clients, as their poor payment record can delay other client work.
2. Automate Your Invoice Process
Remove the guest work and manual steps for initiating invoices and collecting payments. Your accounting software can function as your favorite accounting administrator by kicking out invoices with a click of a button. Your sales representative can draft a project proposal on-site, obtain client signatures, and create an invoice within minutes. This can help improve your project, win percentage, and provide greater efficiency for your clients. Plus, clients can review the contract while your team is on-site and ask questions or revise the proposal. Even if your client needs additional time to review, you’ve eliminated several touchpoints and time-intensive activities with this technology.
Automate invoice reminders based on your chosen cadence to put positive pressure on contract acceptance. This will differ based on your industry and sales targets, but escalating reminders is a useful strategy for all industries. Once work is accepted, your system can automatically generate invoices and reminders based on your contract terms.
For consulting work, this may initiate a fixed term, rate, or project agreement. Your initial contract may identify an annual spend for services while monthly invoices will reflect work completed. When you sign contracts, obtain contact information to ensure your invoices reach project leads and those empowered to complete payments.
3. Incorporate Technology Best Practices and Payment Methods
Managing a business’s accounting records is an exercise of give and take, and modernizing your technology can help. Optimize your cash flow to ensure you’re taking in a consistent rate of client payments to meet your obligations. Clarify your payment expectations in each invoice, listing a date due rather than upon receipt. Ideally, you are delivering digital invoices to clients, which increases the speed of delivery and reduces potential hangups.
Confirm successful delivery by using software that provides deliverability statistics and open and click rate information. Monitor this closely as organizations’ cyber security filters can trap automatic emails. Work with your vendors and information technology team to determine when to test deliverability. In some cases, you may need to communicate to clients how to update their email filters to accept your automatic invoices.
Expand your payment methods to reflect industry, expectations, and current-day methodologies. Some businesses have long preferred cash or check transactions, but these lack traceability for clients. Business clients and individuals alike may be managing cash flow by using credit cards. Credit payments can also protect clients from fraud and offer perks and benefits to their bottom line.
When you accept multiple payment types, you reduce the potential friction that payment methods may generate. Additionally, consider accepting newer payment methods that increase access for clients such as PayPal or digital wallets. Finally, if your business serves clients who may be splitting payments, like vacation rentals, facilitate split payments. Offer this convenient feature to streamline booking and ensure reminders reach the responsible party and reduce stress among vacationers. By facilitating split payments, your vacationers don’t have to collect money from one another, making their stay more enjoyable.
Reinforce Your Value and Your Business With a Tight Accounting Process
When you follow through on your business’s payment terms, you reiterate the value your company provides its clients. Commanding the expectation of on-time payments shows respect for your team and their work in the industry. Whether you’re collecting payments for consulting services or weekly lawn care, you are adding value. You must ensure your team’s efforts are rewarded on time and in alignment with contractual agreements. By maintaining a tight and consistent accounting process, you can achieve target cash flow, and maintain a financially healthy organization.
