You’ve finished your work, the client is happy, and you’ve just sent off the invoice – now you can relax, right? Not quite yet!
Just sending out your invoices isn’t enough – you need to remember that a sale isn’t a sale until the money’s in your bank account!
Emily Coltman ACA, Chief Accountant to online accounting service provider FreeAgent, gives her five top tips on how to collect payment from your customers and ensure that you stay in the black – not the red.
Don’t make your customers think – make payment simple!
When it comes to invoicing, it pays to put yourself in your customer’s shoes. Think about all of the different ways your customers could pay you, and which would be the most straightforward for them.
Also think about the risk involved with each payment method – for example, a direct debit might be convenient, but if the customer’s balance is too low, it could be returned.
One of the easiest ways to pay online is PayPal or Google Checkout – both will let you take card payments without a merchant bank account.
Using these services means that your customers don’t have to give their credit card details to you directly, and you won’t incur the fees and additional admin of a merchant bank account.
Finally, make sure that your customers never have to dig around to find your payment details – the easiest way is to include payment details, including your bank account number and sort code, on every invoice that you send.
When to ask for payment
You need to make sure you achieve an acceptable balance of risk between yourself and your customer in this area.
Asking for full payment upfront is a fantastic low-risk option for you, but it could put prospects off, especially if they haven’t tried your product or service and don’t know if they’ll be happy with it.
You should consider offering a money back guarantee to make them feel more comfortable. Alternatively, you could spread the risk by asking for part payment upfront and part on completion of the work, or delivery of the product.
Asking for payment in full once a project is finished or the product is delivered puts a lot of the risk on to you.
You could end up out of pocket if your customer delays payment, or even refuses to pay altogether, but you’ve already delivered the service or the product.
Communicate your payment terms clearly
Make sure your customers and prospects know when they should pay.
Set your payment terms (i.e. 10 days, 30 days, etc.) and make sure they’re clearly visible on your website, and reinforce the message by including payment terms on your invoices, too.
You may also want to consider adding a more personal approach onto your invoices to better communicate them to your customers. For example, we had one FreeAgent user who customised his invoices with a picture of his children and a note saying that they wouldn’t get fed until the payment was received!
While you might not want to go as far as this example, a personal touch can remind your customers that there’s a real person behind your invoice, and that they should deal with that payment now instead of putting it off for another week.
Don’t be shy – chase late payers
A lot of small business owners make the mistake of not chasing money that they’re owed, because they’re worried about losing customers, or don’t know how to remind customers without risk of offending them.
Remember, you’re providing a product or service that your customer wants and needs. Don’t be embarrassed to chase them for the money.
If you’re worried that doing this yourself could damage your customer relationships, consider using a virtual PA service, or use online accounting software that will keep track of outstanding payments so you’ll never forget to send reminders to your customers.
Emily Coltman ACA is Chief Accountant to FreeAgent, who provide an award-winning online accounting system designed to meet the needs of small businesses and freelancers. Try it for free at www.freeagent.com.
The content contained in this article is for information purposes only and should not be used to make any financial decisions.This article links back to http://www.freeagent.com