On-time payments are an absolute must for service businesses to remain operational. Timely payments from clients make it easier to maintain cash reserves for unpredictable times such as economic downturns or the COVID pandemic. What’s more, predictable cash flow makes it possible to plan ahead for business growth initiatives.
However, there are many factors that all too often lead to late payments, such as:
- The customer doesn’t receive your invoice because you forgot to send it, or it got lost.
- Payment-related business relationship conflicts due to customer dissatisfaction.
- You don’t accept payments in the methods that your customer is accustomed to.
- The customer claims that they have already paid.
Of course, some of those reasons are not under your control, but there are certain steps you can take as a service-based business to ensure that the possibility of delayed payment is minimized.
In this article, we share five ways to ensure timely payments from your clients.
1. Generate invoices on time and send follow-ups
Invoices are legally binding commercial documents that let the client know how much they owe you for the services they commissioned. An invoice contains the following details:
- Name of the customer
- Itemized list of services
- Details of your business
- Accepted payment methods
- Steps they can follow if they have questions
As a business owner, you must make it a top priority to generate invoices as soon as a client receives your services or books an appointment for your services. In some cases, if you’re performing multiple services in a given billing period, it might make sense to invoice at the end of a month.
Using vcita’s business management app, you can accept service appointment bookings on your website and require that your clients prepay upon scheduling. You can also set the platform to send out invoices automatically according to whatever cadence makes sense to you – immediately after each appointment, or on a given day of each month.
Furthermore, vcita can send automated reminders with included payment links via email and SMS to ensure timely payment. You can charge clients’ credit cards through the secure processing gateway of your choice, and integrate upselling and cross-selling features in your digital invoices, thus making it an all-in-one payment solution for service businesses.
2. Create and be transparent about your payment policies
Terms and conditions, terms of service, or payment policies contain legally enforceable rules of engagement that the buyer and seller should agree on before making a transaction.
As a business owner, it is your responsibility to frame those and be transparent with your clients about them because:
- You will attract and do business with the right audience
- Your clients will have the right expectations from your services
- You can easily avoid any conflicts stemming from disagreements
This will increase the degree of trust your client has in your brand, and you will be on the same page while doing business with them.
DocuSign makes it easy for you to create payment policies and related documents and send them over to your prospects to get their signatures before they do business with you. Trusted by users in over 180 countries, DocuSign also helps you with contract lifecycle management and analysis.
3. Forge and nurture personal client relationships
If you manage to consistently deliver high standards of service, your clients will be satisfied and are more likely to pay you promptly. But sometimes, due to circumstances beyond your control, you fall short of the expectations of your valued clients, which may lead to delayed payments or worse, churn.
This is the reason you need to invest in building personalized relationships with your clients.
When you have a personal relationship with your clients, they are more likely to be understanding of the occasional one-off instance where their expectations weren’t met, so that they’ll still pay you promptly.
You can forge such a relationship with your client through one-on-one conversations. ActiveCampaign, a marketing automation platform, enables you to segment your clients based on their preferences and previous interactions with your business and put them through unique drip campaigns.
By cementing your position through warm and helpful conversations, you can ensure timely payments from long-term clients.
4. Accept multiple payment options
In a world where customers expect personalization, it’s important to offer payment methods that fit what they’re familiar with.
If the customer is not comfortable with the payment options you provide, you risk:
- Losing their business if they haven’t availed of your services yet
- Making their experience suboptimal
- Spending more time (and therefore money) to make an alternative work
All the above reasons have a direct impact on how much and how quickly you get paid.
Accepting multiple payment methods have the following advantages:
- Reduce hesitation from your clients during a purchase
- Reach a wider audience
- Place yourself as a forward-thinking, credible brand
5. Consider a retainer-based payment model
A retainer payment model can be put to effect when the client avails of your services consistently.
When you put a client on a retainer, you bill them periodically and the amount will be similar each time provided their requirements remain the same. This helps to ensure on-time payment for a few reasons:
- The client will clear the invoice without taking much time to go through its contents, as they have already availed of the same services previously.
- You can set up subscription billing to be fully automated.
- You can get bulk payments for a long period of time, like a quarter or more.
Below are the steps you can follow to set up a retainer pricing model for your valued clients:
- Create a customized offer: Keep in mind that this is a client that will continue to purchase from you. You can include discounts, additional services for free, and goodies to sweeten the deal.
- Discuss with your client: Approach your client with the intention of saving them money. Show them how a retainer pricing model will help them and consider their suggestions as well.
- Build an adaptive process: The retainer model should be able to incorporate the temporary requirements of your clients.
Timely payments are necessary to keep a service business alive and kicking. However, roadblocks such as dissatisfied clients and failing to send follow-ups can result in delayed payments.
As a business owner, you can rely on the following methods to increase the chances of getting paid on time:
- Create invoices on time and send follow-ups with a payment link.
- Frame clear documents highlighting the terms of service.
- Invest time and resources in building personal relationships with clients.
- Let the clients pay in the method they are most comfortable with.
- Adopt a retainer-based payment model for loyal clients.