When you’re a freelancer or solo-worker, one of the most important parts of your job is controlling cash flow. Getting invoices paid can sometimes be a pain in the ass, especially when you’re working with smaller companies and new clients.
Over the past few years I’ve managed to keep a good cash flow with only a few late payments, here are my top tips for making sure that you get your invoices paid in a timely manner.
Start with a contract
As with everything related to business, you should start with a contract. My contract has a section devoted to payment terms and a payment schedule. I only contract for my web design business, it’s not a normal thing for smaller wholesale orders.
Get a deposit
For my service based web design business I take a 50% deposit upon the signing of the contract. The projects I work on are generally around the £2-3k mark, so I really need that initial investment & security from the client.
I’ve never had a problem with getting this deposit from the client, it’s pretty standard practice. You can be flexible with your deposit terms if the client isn’t super comfortable with dropping the full 50% in the first instance – I’ve split the full project cost over various deliverable points of a project before (25% on contract, 25% on wireframes + design, 25% on development and the remaining payment on “go live”).
I’d also say that in the case of large wholesale orders for product based businesses (the kind where you have to heavily invest in raw materials) then definitely get a deposit! Why shouldn’t you? I’d also suggest sorting out a contract for those orders, too. Cover your damn ass!
Send out your invoices straight away
It goes without saying that the sooner you get your invoices out, the sooner you’ll get paid. You might want to send your invoice as soon as you finish up on a project or send out a contract, or you might keep a list to send out all your invoices on Friday morning (oh, is that ever a good end to a week!). Either way, make sure you’re prompt with the sending of invoices!Be prompt with sending invoices; the sooner they're sent, the sooner they're paid! Click To Tweet
Make sure your invoicing system leaves no room for confusion
I use an accounting system that includes a really neat invoicing set-up. It alerts me when invoices are overdue, it numbers invoices appropriately (so that I can reference which invoices are outstanding), and it lets me keep track of the accounts of each client. Kashflow gives me a really quick at-a-glance look at who owes what and leaves no room for confusion between me and the client.
If you’re sending out a lot of invoices it can get quite confusing very quickly, make sure you have a system in place so you can easily see what’s what with your outstanding invoices.
Include all the key information on your invoice
Make sure that everything, EV-ER-Y-TH-IN-G, the client could possibly need to question is available on the invoice:
- The project reference
- A breakdown of costs (if appropriate to the project or order)
- Your address
- Whether you’re VAT registered
- Your company number
- Your payment terms
- The payment reference
- A purchase order (if appropriate)
- The invoice date
- The due date
- Your bank details
- Other payment options
- Your email address and/or phone number
Make it as hard as possible for your client to claim a lack of information as a cause for late payment
Know your Net 30s from your Net 60s, and find out your client’s usual terms
My payment terms are generally Net 30 for product based orders, but a little different for my service based stuff. I ask for my deposit invoice to be paid ASAP after the contract is signed, and state that work can’t started until the deposit is in place (although to be fair I sometimes start anyway for clients who I know are good for it). My final invoice after the “go live” part of the web design process is contractually requested to be paid no more than 14 days after the invoice is sent (I sometimes change that depending on client discussion).
Make sure both you and your client are aware of the payment terms, and make sure you’ve discussed any different terms with clients. I have some wholesale customers who work on 60 day terms (ouch!), but I know they’re good customers and will pay, so I’m okay with it. Don’t let lengthy terms ruin your cash flow though, 60 days is A LONG time not to get paid for something.
Email your invoices and prompt the client the day after late payment
I send all my invoices by email. It’s 2015, people, no one needs a paper copy. Kashflow lets me send my invoices directly from the dashboard, which is super convenient and I can keep track on when I’ve emailed invoices to the clients.
If an invoice is overdue I tend to send a friendly reminder email (and another copy of the invoice) the day after the payment was due to arrive. I’m not a dick about it, things happen, people forget, it’s usually an innocent mistake and people are mortified that it’s slipped off their radar.Don't be a dick about a day-late payment, it's usually an innocent mistake! Click To Tweet
Stand your ground
Sometimes people are wankers and don’t pay, though, even after your friendly reminder. Every attempt at contacting leads to silence, and you can try calling, sending out paper invoice, and they still don’t pay.
It’s time to bring in the contract they signed at the start of your project. It’s time for strongly worded emails and a mention of claims and lawyers. It might even be time for naming and shaming (but be careful there, don’t do anything rash that might invalidate any claims/get you in hot water).
You can start introducing interest on to the invoice once it’s gone beyond its payment date, and you can start to look at more serious routes of claiming the money that you’re owed.
Here’re some helpful links for when things go really sour:
- Gov UK – Make a Claim
- Gov UK – Business debt and bankruptcy
- Money Saving Expert – Small Claims Court
- Which? – When Should I use the small claims court?
Have you ever had to chase a late payment? Do you have any tips for making sure you get paid on time? I’d love to hear them!