A business must develop a philosophy about how they can get clients to pay an invoice.
Receiving payments is not “necessary evil” or “a dirty part of the job” but rather a wonderful and appropriate exchange for the value you deliver to the client. Exchange has a long tradition and represents the highest ethical Canon of modern capitalism: Agreed payment for agreed value. Value-Based Fees- How to Charge – and Get – What You’re Worth, By Alan Weiss · 2008.
Late payments are still a common challenge for businesses, with 49% of invoices paid late globally, according to a report by Atradius.
Small businesses, in particular, suffer the most. It is not surprising that 82% of business failures are due to cash flow issues. If you are struggling with clients who delay or ignore invoices, the following strategies can be effective for you to ensure timely payments.
QuickBooks found that 59% of small businesses don’t include late fees in their invoice. This reduces urgency for clients, so including penalties improves the likelihood of on-time payments.
The sooner you send an invoice, the faster you get paid.
A survey by FreshBooks shows that businesses that send invoices within a week get paid 1.5x faster than those that send invoices later.
According to the PYMNTS Report, 30% of late payments result from a lack of preferred payment options. To avoid delays, offer
According to a study by Xero, businesses are 90% more likely to get paid if they follow up within 3 days of an overdue invoice.
Similarly, late payment penalties also create an urgency. A study by Sage found that invoices with late fees get paid 45% faster than those without.
Clients who value a relationship with you are more likely to prioritize your payments. Be proactive by:
“The currency of real networking is not greed but generosity.” – Keith Ferrazzi
When clients feel valued, they’re less likely to delay payments.
If repeated reminders do not work, take stronger measures.
Legal action is an effective remedy in most cases. According to a survey by the Federation of Small Businesses, only 23% of small businesses pursue legal action for unpaired invoices. However, those who do take legal action are able to recover 75% of the debts owed.
Getting paid is not only important but often the key to a business’s survival in the market.
Leaving money on the table is the equivalent of burning money you will never ever cover, and we are talking about millions of dollars over your career.
Getting paid on time requires clear policies, prompt invoicing, multiple payment options, and effective follow-ups.
