Naturally, you want to reduce your debtor days, while your customers want the cashflow advantage of settling bills as late as possible. This article is about how you motivate your clients to start settling their bills in a timely manner.
Why clients pay
The reasons clients pay can be classified under two headings:
Either your clients fear the consequences of not paying you (such as being fired by an excellent supplier, losing the level of client care they had, or you taking away their goods), or paying your invoice becomes a mental action item, weighing them down.
You can, very gently, use both of these to nudge your clients to pay on time.
If you bill regularly, your clients will realise that you want to be paid regularly. It will also establish a rhythm, allowing your clients to develop a sense of lateness.
Email your invoices to your client (as well as posting them, if you wish), and mark them payable on presentation (or within one day of presentation). Include all necessary payment details, including the total amount, in the email and on the invoice. If possible, include a link to pay it online.
The reason to do this is that if there is a barrier to payment, or if the invoice is not yet payable, it allows your client to mentally relegate payment to their list of tasks to do sometime, if not never, thus relieving themselves of guilt. You want them to form an intention to do it by a specific time, preferably soon.
If your client does not acknowledge receipt of the invoice, or does, but does not mention when they will pay it, call them two days after sending it. Two days is the perfect time to chase - they have had time to action the invoice, or get in touch, but in no way can you be said to have delayed getting in touch. Be friendly in this call. Make smalltalk, then ask them about the invoice - did they get it, will there be a problem paying it, when can they pay it? Pin the customer down to a definite time, and if it is more than a few days, ask if there is any way you can help them expedite the process.
Once you have a date by which they will pay, diarise it, and chase the following day if they don’t. When chasing, ask why they haven’t been able to pay.
If you chase quickly and confidently without being aggressive, your client should feel guilt, but will be restrained from relieving themselves of that guilt by (justified, in their mind) aggression. This should make them feel that they ought to be relatively compliant.
Establish the pattern of paying early. If possible, ask for a payment on account of your fees, and invoice regularly after that. The payment on account should be taken before you start work. This will allow you to know that they are able to process payments, to shake out any administrative barriers that the client likes to raise to extend payment times (such as purchase order numbers), and that they are serious about starting the job.
If you can do this, potentially you will have reduced the amount of credit you are giving to your clients to zero.
One final way of making your clients feel either fear or guilt about not settling your invoices promptly is to remind them of how valuable your service is. Use relatively full descriptions of the work you did, to remind your client that it was difficult and took time. Relate your work to the value of the project that it enabled, and calculate the ROI of your client in paying your fees. Use industry-specific statistics about how much value your product or service adds, to calculate how much value your work added.
You need to act early to make your client commit in their own mind, and preferably in words also, to paying your invoices. Establish it as a habit in their mind, and don’t allow them time to forget about you.