Late or non-payment is of particular concern to both new and established consultants. We all know or have at least heard of the damaging effects of badly managed cash flow to businesses. Failure to collect cash on time from clients you’ve worked so hard for may cost you more than you think.
Below are my top 12 tips for getting your clients to pay on time.
- Invoice promptly once the project is completed and the client acceptance has been confirmed.
- Make sure that your invoices conform to any special requirements your clients may have i.e. supplier references, payment offices etc.
- Follow up with an email or phone call to confirm receipt of invoices. Some clients will claim they haven’t received invoices to delay payment. Don’t give them an excuse.
- Offer various methods of payment i.e. fixed installments at agreed checkpoints in the project. This is especially suited for long-term projects that attract higher fees.
- Offer an incentive in the form of discounts for an advance or prompt payment. Everybody is looking for ways to save more money.
- If you have a strong reputation in the market and are not a fan of chasing late payments, like me be brave and ask for a deposit or payment in advance. This is how I get commitment out of my clients whilst ensuring a healthy cash flow.
- Have an engagement letter or consulting agreement in place that sets out your payment terms.
- Have a system for reviewing all outstanding invoices and follow up relentlessly on late payers. If you’ve done your time in a large consultancy firm, you’d have experienced the pressure and stress associated with the monthly or quarterly cash collection targets. Adopt this approach in your business.
- Offer various ways of accepting payment so that it is easy for your client to pay you.
- Small consultancies can set up a simple spreadsheet for monitoring payment and due dates. Larger firms can purchase complex software programs that streamline their invoicing and cash collection activities.
- Monitor your cash flow by setting weekly/monthly collection targets.
- Last but not least try checking your clients background or credit worthiness before accepting them. The large consulting firms do this very well. This falls under the RISK criteria used for assessing all new clients. It is better to have a few clients who pay on time than hundreds who don’t.
I know it seems like a lot to do in addition to your day-to-day tasks, but this is why you are in business – to make money (unless you are in business for other reasons). Close the loop and collect your cash. Get help and delegate it if you must but cash collection is a business critical activity.
Businesses are here today and gone tomorrow so don’t assume that you will be paid once you complete the project. Collect your cash today!
Griselda K. Togobo (ACA,MPhil.) is the founder of AWOVI Consulting Ltd, a coaching, consulting and accounting practice devoted to increasing the success rate and profits of small businesses. AWOVI’s goal is to enable small businesses to develop and implement the programs and systems that will make their businesses profitable. AWOVI’s online portal is used to support and inspire entrepreneurs with advice, tools and success stories. Visit her Coaching, Consulting and Accounting Blog