Money! The reason we all work (well most of us). For freelancers or self employed it is totally our bread and butter. And we need it to flow in based on when we complete work.
We invoice, we get paid - right?
Well actually for a lot of small businesses that is just not the case. We are at the mercy of the customer when it comes to our cash flow. If they are slow at paying, we sit there and wait and wait and wait. Being English, we don't like to remind or push or ask again. But that is just what we need to do.
Having worked for and with a number of organisations that struggle with the payment of invoices and having seen a number of organisations I have worked with consider folding as a result of customers just not paying I feel the need to give you my top tips. So here they are:
1. Invoice half and half or in stages - Your payment terms are your right and especially where you incur costs along the route of the work it is important that you are able to invoice some of the project fee upfront. It also sets a tone that says you are serious and expect payment for this piece of work. You are obligated as are they. And it is important to have them sign off the work on completion so that they have no reason not to pay.
2. Set your payment date inline with their payments - There is absolutely no point setting a payment date for 14 days time if your client has set rules internally that mean that they will pay in 30. It sets your stress levels high before you even start. So getting to know your client here is crucial.
3. Find out about PO numbers - Larger companies and certainly most public sector organisations have to supply you, the supplier, with a Purchase Order Number (PO Number) which should be placed on your invoice. When your invoice goes through to the finance department they will see that PO number and see that they can pay you (the supplier) up to a certain value and can take action immediately. If there is no PO number investigations start, conversations back and forth and it just slows everything down.
4. Have a process (automated wherever possible) for follow up - This takes some of the stress out for you. You don't need to feel like you are following up constantly because your systems are doing it for you. It feels a lot less like nagging.
The most effective process that I have found is send out your invoice, follow up with a statement on the day that the payment is due if the money has not appeared. Don't send a statement before it is due, it actually only works to annoy the person paying the invoice, you gave them a date they had to pay by and then you chase them before it is due.
Then chase again one week later questioning when you can expect to receive payment. That pulls on them to make decisions. That date should be within in seven days because they have already had a month to make the payment.
Then if payment is still not forthcoming your language can become more official, phrases such as our board are aware, your outstanding invoice will be sent to the legal team.
I would also, at this point, send out a paper version of the invoice with a letter stating that you expect payment in no later than seven days and send it by recorded post. That way they are signing to say that they have it, and it is sitting on their desk in front of them rather than in an email box possibly full with lots of other junk.
These steps may seem very heavy and harsh but you did the work, it was signed off and they agreed to pay you for your services. Don't feel bad about asking for what is rightfully yours.
5. Get Someone else to do it - If all this feels way too much and you just don't feel strength to do it, then get help from someone else. There are all levels of debt collection services, some organisations pay for the banks to do it for them, others pay a more scary debt collector. The other option is to employ a service such as ours that just takes this process away and does it for you.
When you are the one who has to have the relationship with the customer and you don't want to damage that relationship by asking for money, let someone else do it for you, allowing you to keep the conversation light and positive.
I don't know about you but I find it much easier to help someone else and chase on behalf of another than I do for myself.
I hope you find these tips useful and I would love to hear back from you if you make a breakthrough in payment as a result. We all like a good story so don't be shy and get in touch.
If you would like to find out more or speak to us about supporting your own collections, please email me at Rachel@theworkbees.com or call on 01223 782105.
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