Last Updated on: 24th March 2025, 01:12 pm
You may be passionate about your line of work, but that doesn’t mean you are doing it for free. If client acquisition seemed challenging, the difficulty of collecting payments from them may come as a surprise. However, establishing clear payment terms and holding clients accountable for on-time, complete payments are essential for your business’s health. Learn how to improve your collection rates, internal controls, and processes, allowing your team to focus on service and growth.
1. Establish Payment Policies
Without rules of engagement, it can be difficult to collect payments from clients. Before you embark on business development efforts, determine what payment terms and policies are needed. Research what is typical in your industry and consider your small business and its unique situation.
For example, a service-based business like a consultant may not require payment until work is complete. However, if client work requires you to order expensive, custom supplies before completing the job, a deposit may be necessary.
Whether you’re installing custom draperies or strategizing a marketing plan, you should outline payment expectations, deadlines, and processes for clients. Use invoicing software to generate quotes and centralize client data, including any unique payment terms. Align pass-through costs for essential supplies, equipment, and orders you place on their behalf. Include payment policy reminders, terms, and due dates on your invoices which mirror client agreements to reinforce payment expectations.
2. Offer Multiple Payment Options
Your clients face their own unique payment, policies, budgets, and expectations. A business client may have a complex requisition process to manage upon receipt of your invoice. Make their job easier by offering a range of payment options like credit and debit cards, ACH transfers, and online payment platforms.
Digital payments made via debit or credit card may be easier for clients to manage, especially for lower-dollar invoices. If your clients are working on a retainer, gain pre-approval for monthly invoices charged by card. Highlight your payment policies and options on your website, in your quotes, and in contracts. Residential clients can review, sign, and agree to these options with a clear understanding of the payment terms.
Strive to understand your clients’ budgets, operations, and challenges early in your engagement. Position yourself as a partner for getting the job done, but also ensuring payments are the least of their worries. Business clients will have budget limitations to manage, so keep an open dialogue regarding invoice timing and contract limits.
3. Tighten Your In-House Accounting Process
Train your team on the company’s invoicing process, payment policies, and client agreements. If your agreements vary by client, work type, or dollar amount, ensure those variances are clear for everyone. Your sales team should be able to easily cite the policy just as well as your accounting team can. Send timely invoices to begin the payment timeline and do so on a regular, repeatable, and maintainable schedule. A landscaping company may send an invoice upon work completion whereas a consultant may do so monthly.
Integrate financial reporting in your team’s daily dashboards and embed reports into your intranet, democratize access, and convey team responsibility. Identify metrics to monitor and which require elevation and to be closely managed and resolved. If a client invoice becomes past due, there should be a process in place to obtain it. Automated reminders sent through your cloud-based invoicing software will help remove some manual work.
Consider the nuances associated with specific clients such as how long you’ve worked together and their typical payment habits. An accidental late payment may be a one-time error or the beginning of a long-term issue. Collaborate with your client-facing team to understand typical challenges and issues to help guide your resolution process.
4. Establish Good Client Relationships
Key to any relationship is good communication, and client relationships are no different. Establish rapport between your company and the client, making note of preferences and norms along the way. Store this information in your client relationship management (CRM) platform to ensure your team can serve clients consistently.
Ask for feedback on each part of your business relationship, from work quality to timely completion and overall value. By establishing an open dialogue, your clients will feel heard and that their feedback holds weight. If your relationship is merely transactional, they may feel less inclined to honor payment expectations.
Audit your client relationship internally to determine if your engagement is mutually beneficial. Analyze your side of the relationship, from work type to on-time payment habits to understand your baseline. Then, schedule an annual account review with your client to discuss their goals, satisfaction level, and plans. This provides a safe place to discuss challenges, like on-time payments, work quality, and communication. Get issues out in the open, discuss how to resolve them, or acknowledge when it’s time to part ways.
Manage Financial Controls to Protect Your Small Business
When you tighten your financial controls, you remove the guesswork that can lead to costly issues later. Remind clients of upcoming due dates with automation, leverage accounting software to analyze payment trends, and maintain good client relationships. By streamlining your collection process, you clarify the financial expectations of your clients and establish protections for your business upfront. Manage your finances, vet the quality of your client relationships, and protect your bottom line with strong financial management.
