Invotrak: The Online Invoicing Blog

Getting paid for the work you do for your clients is, of course, the most important aspect of being a freelancer or small business owner. Sometimes these payments are in different forms (perhaps the client trades a service for your work), but in the majority of cases, it comes down to cash. And, as any MBA will tell you: when it comes to business, cash is king.

Over the last few years, as a small web development company co-founder, and from running an invoice tracking service, I’ve collected some good advice and useful tips on how to ensure the cash comes in. I’ve found that clients often fall within one of three categories:

1. All paid up, on time, with minimal or no hassles – keep these around!
2. Wants to pay, but has to go through their company’s accounting department. Your point of contact isn’t the same person who writes the checks, and as a result, they often need to go to bat for you to get you paid at all, let alone on time.
3. Not at all interested in payments – either attempting to get out of their obligation or purposefully dragging their feet to make things difficult. These don’t usually leave you with much of a choice: go to court (often small claims court), factor, or forget about it.

Let’s talk about how to streamline category 2 client payments: your point of contact likes your work and wants to see you get paid, but they aren’t the ones who control the checks. Here’s a couple tips for when it comes time to send an invoice:

• The first step is to cover the invoicing basics. The invoices you issue should always contain as much information as possible about the work you did, including contact information, your (or your company’s) name and address, and a description of the work. Include as much additional info too, such as a PO number (if applicable) and your point of contact at the company. Your goal is to provide all the information the accountant who will write the check could possibly need, making their life as easy as possible. If they have to go digging for info, they’re likely to put it off.
• If you can afford it, you may want to consider offering a slight discount for prompt payments. Utility companies often do this: your total amount is listed and due within the agreed-upon time frame, but they also provide, say, a 1% discount if paid within 1 or 2 weeks. You can include a line like “1% 14, NET 30″ next to your Total line if you’d like to try this. If your client pays within 14 days, they can take a 1% discount, which should hopefully give them enough incentive to write the check on time.  There are a number of different discount strategies you can try too.
• Try sending reminder emails. If a client has a history of late payments, try sending friendly reminder messages a few days before an invoice is due. It’s especially helpful if you know who is writing the check, but sending them to your point of contact can be helpful as well. You can have invotrak automatically send a reminder out to your clients 3 days before an invoice is due.
• Make it clear in your contract – before you start working, of course – that you expect to receive payment by the date on the invoice. This drives home the point that a check should be in your hand by that date, rather than hearing things like “the check is in the mail”. Being explicit upfront means you’re serious about being paid for the work you do, while still being professional about the matter.

Sometimes there’s just no avoiding it: your client is consistently late in paying you, no matter how hard you try to nudge them into paying you on time. In these cases, you should determine how long it usually takes them to pay an invoice (invotrak has a Reports feature that provides this info) and factor this into the rate you charge your client for future work. You can even try telling them that you’re raising your rate (within the limits of your existing contract) because of consistently late payments. Be careful with this one though: if they start paying on time, they’ll likely expect you to drop back to your old rate.

No matter what, stay persistent. Communicate to your point of contact when there are overdue invoices. You’ll have a lot more leverage with their accounting department if someone inside the company is pushing for you.

Additional Resources:

• Freelance Switch: Getting Paid On Time contains tips on how to create an invoice, as well as what you should do once you’ve sent it. I’d reiterate their point on communication: regularly reminding your client about their invoice has probably been the single most effective tool I’ve used in the past.
• This article at Entrepreneur.com: Get Paid On Time details a number of steps you can take to improve your overall collection rate. A few might be a little extreme (such as joining a union), but sound advice nonetheless.
• For some basic information on how to create an effective invoice, check out Web Worker Daily: Creating Your First Invoice

This entry was posted on Monday, August 4th, 2008 at 8:35 am and is filed under Featured. You can leave a response, or trackback from your own site.