No matter the industry you’re in, one of the most important aspects of business is collecting payments from customers. Indeed, that’s usually the main source of revenue for a company.
However, this is not always a straightforward endeavor, and business owners can often be left wondering how to collect money from clients who won’t pay, as well as how to ask for payment politely from customers that are late, or hesitant paying what they owe.
While you want to maintain good relationships with customers, you also want to ensure that you’re paid, and ideally on time. In this post we’ll take through some tips on how to collect money owed from a client, whilst maintaining good rapport.
Ask for payment upfront
With goods, this might seem obvious, however when it comes to services, it can seem strange to ask for payment first. However, if there’s a degree of trust between service provider and client, this can be a great way to ensure payment is received in a timely manner. When clients pay up front, you don’t need to chase them up with an invoice and will have greater security regarding payment.
Of course, this might not always be possible, especially if you do not already have an established relationship with a client. In this case, consider asking for a portion of the payment in the form of an upfront fee before you start work. That way, you’ll at least have received some of the payment, even if you encounter difficulties getting hold of the rest later.
Be clear and forthright about your payment expectations
It’s crucial that you clearly lay out all expectations concerning payment before you begin working with a client. This means that you are clear and transparent about how much the service will cost, specify the accepted methods of payment, and discuss the time frame for receiving the payment.
To help ensure that payments are made on time, you can offer early payment discounts and late fees on invoices. However, you should communicate these to your client beforehand as they won’t take kindly to having surprise fees sprung on them.
Send follow-up emails
There are a multitude of reasons why a client might not pay an invoice on time — and it’s not always because they have bad intentions. The person in charge of handling your invoice might be on leave, or has recently vacated the role and the company is searching for their replacement. They may have also simply misplaced your invoice.
A follow-up email is a good answer to the question of how to ask for payment politely. If your invoice has been left unpaid beyond the deadline specified, send the client an email politely reminding them that you are still waiting for payment. The tone of the email should be non-accusatory, but remind them of the terms of your agreed contract.
If you don’t receive a response to your email, then you may need to get in contact via other means, such as a phone call. At this point your priority is how to collect payment from the customer, and politeness becomes a slightly less important factor.
Offer an adapted invoice schedule
If your query is not simply how to collect payment from a customer, but rather how to collect money owed from a client on time, then you may benefit from offering the client a personalized invoice schedule.
This can mean that, instead of asking for payment in full, you adapt your invoicing schedule to allow for payments in instalments. This can often help customers to make the payments in a timely fashion.
Reach out to others at the company
Sometimes the reason you’re not receiving your payment is because you’re not in contact with the person who handles payment processing. For example, if you’ve been hired for advertising services, you may have only been in touch with the advertising department.
Ideally, this kind of miscommunication would be avoided by laying out a clear protocol for payment prior to beginning work. However, in the event that it does occur, make sure you find out exactly who you should contact for invoice payment. Then, in future work with this client, make sure you contact the correct person for matters concerning payment.
Consider dropping the client
If you’re dealing with the issue of how to collect money from clients who won’t pay, it might be time to streamline your client pool. If you’re constantly chasing up payments from customers who are avoiding you, it’s likely that these clients are not valuable to you and you’re potentially wasting your time working with them.
In this case, it might be time to terminate your relationship with these tricky customers and instead focus your attention on securing higher quality clients that will pay you on time.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.