When clients pay late, it can have a nasty rippling effect on other areas of business. You may not be able to pay yourself, your bills, or your contractors. Cash flow problems can destroy a business. That’s why it’s so important to do whatever you can to encourage prompt payments. Your role is getting your invoices out quickly, and making it as easy as possible for clients to pay you. The ball is in their court once the invoice is in their hands.
Invoice Incentives to Consider
Here are a few invoice incentives to get your clients to pay on time or even early.
Incentive #1: Pay on Time, Avoid Late Fees
Avoiding a late fee is an incentive for clients to pay on time. A common late fee is around 5%. You don’t want your late fee to be so high that it’s insulting. But you do want to have a late fee that’s high enough to deter your clients from paying past the invoice due date. Put your late fee in your contract terms. When due dates from your invoices are coming closer and closer, remind your clients that a late fee will be due if they pay past the deadline.
Incentive #2: Pay Early, Get a Discount
Offering a special discount when a client pays early can get money in your hands even faster. You can choose to offer a set amount off the invoice or a percentage discount. People like to feel like they’re getting a deal. They may be more inclined to put an early payment due date on their calendar knowing that they’ll get something in return fo paying early. Just make sure the discount you set isn’t going to cut into your profit.
Incentive #3: Pay on Time, Continue Working with Me
This is perhaps my favorite payment incentive because freelancers and other business owners can underutilize it when trying to maintain business relationships. You can cut ties with clients who consistently pay late. The incentive for them here is that paying on time keeps you working. If you’re highly skilled and you produce great work, they need to understand all of your value comes with a price. You don’t have to continue being in a toxic relationship where you’re getting paid whenever someone feels like it.
The business or person you work for needs to understand that payments need to be made on time as a condition of working with you. If they’re not paid on time, you will no longer work on future projects. Even if you have a contractual agreement, a client who doesn’t pay on time is likely not fulfilling their side of the agreement. If clients see that you continue working without payment, it shows that they have the leverage. Business is business. Letting someone pay late once may be okay as a favor but allowing it consistently can start impacting you.
Final Word on Invoice Incentives
Offering invoice incentives can get you paid sooner than later. You may even find your clients pay earlier than the deadline when you explain the benefits of doing so. Think of the payment incentives you want to offer. Add the payment incentives to your contract.
Republished by permission. Original here.
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