Non-Paying Clients Are No Clients
Are you prone to blindly trusting that everything will work out when it comes to your invoicing? Especially if you know the client? Do not accept any assignments without checking first if the client is able to pay the bills.
Winning big projects can be very attractive for a small architect or contractor (challenging projects, lots of billable hours, big references on your website, …). But don’t forget that you’re running a big risk when a significant part of your income depends on one or a few big customers. If they fail to pay (or pay too late) the results can be dramatic. So you really must do the necessary to get your money in stead of trusting that all will be fine.
It makes sense to test the client for his or her creditworthiness even before you accept an assignment. Checking out clients to see if they are who they say they are and whether they can pay or not, has nothing to do with suspicion, but everything with doing business in a thought-out and conscious manner.
It happens on a regular basis that architects or contractors do not push their clients to pay for fear of losing them. They quietly wait until the client pays. Sometimes that takes months. Then there is the possibility that your clients do not pay at all. So, don’t sit around, waiting for payment, but be proactive. All those outstanding credits cost interest, causing lost profit and working capital. In a project based industry, like the construction industry, the amounts represented by one project can be big enough to have a significant impact on the bottom line. Following the tips in this article can make (much more than) the difference between oysters with champaign vs MacDonald’s for Christmas dinner.
Design of invoice is important
An invoice is not just important for financial reasons, it is also a representing facet of your business. It matters what it looks like. But that is not the only thing that matters: what your invoice looks like may also decide how fast it will be paid. Take a closer look at the design of your invoices. These tips may help you:
- Make sure that the total amount can be found at first glance. This will prevent that the amount due will be paid without the VAT included;
- Make sure you have a clear design with a clearly recognizable logo;
- Mention the exact date on which the amount due must be received. The standard line on the bottom of an invoice could be ‘payment due within 14 days’.
The first reminder of payment
It is important to not wait too long with sending a reminder of payment. In many cases it is not a matter of not wanting to pay, so it is a good habit of addressing the client in a friendly way.
Talk to your clients and stay in touch. Customers that you have a good contact with on a regular basis find it more difficult to ignore your invoice. It is a lot easier for them to ‘forget’ you when they never hear from you. It is not always effective to making people feel guilty personally, but in many cases, it does help.
The skills of ‘the caller’ have a large impact on whether the invoice will be paid after the call. A few tips to have a more effective phone call:
- Know who you are calling: if the person who is supposed to pay the invoice is a man, then a woman should make the call. Is it a woman who is in charge of the bookkeeping, it will work better if a man makes the call. Telephone conversations automatically run more smoothly if different sexes are talking to each other (call it instinctive alertness).
- Prepare yourself: know what you are calling for and about. Be direct, but start off with a good opening line. The first call you can open with asking how the work that was done has been perceived. Then you can start talking about payment of the invoice.
- Pay true attention to the person you are talking with: the ‘A’ of attention works with every ‘client’, no matter how tedious you think they are. A little chit-chat can break the ice. Such a conversation can strengthen the client relationship, which leads to quicker payment and possibly to a follow-up or new assignment.
- Come to an agreement before the end of each the conversation (unfortunately sometimes more than one conversation is necessary). Agree upon a day when payment of (a part of) the invoice will occur. If this agreement is not honored, you will have a good reason to call again.
- Persevere: you think it is a chore to have to make the call, but the delinquent payer doesn’t like to have to talk to you either. Be ‘surprising’ with the times that you call (around 17:30 for instance, the receptionist will have gone home and the owner him/herself may pick up), or even the number that you are calling from (when there is no response when you use the business number, because they already know why you are calling). Be steadfast, remain correct and friendly, but firm.
Did you know that there is a better chance of success in the timing of sending invoices? Five tips to take advantage of good pay moments and to stay away from the bad times:
- Start the collection process in a timely manner. At the end of December and the beginning of May the creditworthiness of consumers is the highest, so make sure that you are on the top of the list during those periods. Send your reminders before that time and pay the right kind of attention to your claims.
- Middle and small business payment history is bad at the end of May and during the vacation period. Make sure that you have collected your claims before these periods.
- During the period of making of the annual balance sheet, the focus within the companies is not on debt management. Make sufficient preparations to collect due invoices before the end of the year.
- Set the due date in general around the 20th of every month. For debtors with children the dates when child benefits are being received are favorable periods.
And for now … let’s order some oysters and champaign :)