Getting Paid On Time By Your Clients
As business owners, we sometime struggle with clients who do not pay their bills in a timely manner. It is challenging and uncomfortable, especially for the small firm and solopreneur, to continue to ask the client to pay their bill. Many of you might not have a bookkeeper or someone administrative on-staff that can take this task off your plate.
Setting up a clear set of systems, will help you manage this grey area more effectively. Remember, cash is key, and your cash flow is incredibly important to the success of your business. First and foremost, remember that you deserve that money. It is a transaction between you and your client for services rendered. You should never feel bad asking for money that you have worked very hard for and is owed to you. This signifies and equitable exchange. In all honesty, the clients are the ones who should be feeling bad. Not you.
In any business, but especially in the design industry, where we pour our heart and soul into the creative solutions we share with our clients. Once you have provided a creative service to a client, it is no longer their money – it is your money.
To make this easier and less uncomfortable, you can try to create a mantra around this and repeat affirmations such as “I deserve this money” or “I have made an equitable exchange with my wonderful client” and silently whisper this to yourself whenever you are about to have a discussion with the client, or you are sending a follow-up email about payment. I believe it may also be helpful to create what I call a “Gold Card.” You can use an index card, write down the mantra and pin to your vision board or keep near your monitor. Writing the words down and being able to see them and absorb them into your brain and body is a great way to ensure that you never feel bad about following up on money again.
You may also adopt a practice we use. In our What to Expect When Working With DCI Studio binder, we spell out our payment terms, (even though they are clearly stated in our Letter of Engagement) so that clients have now seen this information twice before we work with them. We set forth clear due dates with penalties for late payments as well in our Letter of Engagement, and on our invoice documents as well.
Let’s say you have a prospective client who challenges your payment timeline. I had this once and decided not to work with them. It provided me with a very useful red flag. But, if you feel the client is legitimate, or worth being flexible for, feel free to negotiate terms that still work for you and be sure that they are outlined explicitly in your revised contract.
Another tactic that many business owners have adopted it to offer early payment incentives.
Since we’re talking about contracts, there are several things you can do to discourage — and protect yourself from — late payments. First, consider offering a financial incentive for quick and early payment. When I am working on substantial flat fee projects, I have often offered a 5% discount if they are willing to pay the design fee in full upfront. Incentivizing is a great way to have better cash flow. If you are hesitant about forfeiting that revenue, think of it like this: That discount is well worth the cash flow peace of mind it provides — plus, you have saved the hours you would have spent following up.
For those late-paying clients that continue to challenge you and your team, I suggest that you automate the time-consuming task of following up with them. You can easily do this by using Studio Webware, Design Manager or your QuickBooks program. This can automate not only your invoicing and project management but also your follow up. Some programs even let clients click a link to make a payment through the email they receive with the bill! Magical!
As much as we would all love to believe that we will never have late-paying clients, it is not realistic. When faced with these clients, it is important not to get frustrated or angry as that negative energy will not facilitate the equitable exchange between you both. Not all late payment clients are bad clients. I am sure we have all missed a payment or two in our lifetime, despite the best intentions.
Remain cordial and never send an angry or curt message. Be sensitive and personal. Perhaps there is an illness or an issue that precluded them from paying? Maybe the bill was misplaced or never received? Keep your cool, address the problem early, with patience and understanding. The client will appreciate this, and it could even deepen your professional relationship.