7 tips to avoid late client payments

avoid late client payments

Late client payments is a common challenge for IT Solution and Managed Service Providers (MSP’s).

Cash flow is important in any small business, but many IT businesses are reluctant to chase clients who have overdue bills for fear of damaging their relationship. I believe that any client who is consistently overdue with payments has already damaged the relationship.

The good news though is that there are plenty of ways to avoid late client payments and I share 7 of them here.

avoid late client payments

Use automated payments

I’ve already spoken about the value of using Direct Debit to simplify Managed Service billing within your IT business.

Any MSPs who are not charging their clients a month in advance for services are certainly missing a trick in my opinion, and those who are waiting for regular clients to manually pay invoices are opening themselves up to late payments.

Of course you can automate payments through Standing Orders, but over time this becomes unwieldy and inefficient. Direct Debit then becomes preferable.

For MSP’s, there are a few good UK Direct Debit providers I can recommend who allow you to take Direct Debits without the need to jump through the hoops the banks put in front of you.

For Break/Fix companies who regularly do work for clients, consider a service such as GoCardless to allow quick post-work billing.

Send invoices by post as well as e-mail

Find out which of your clients prefer to be sent invoices via email, and which prefer to receive them by post.

When I owned an MSP, I worked with a number of clients who would receive an invoice via email and then print it out.

This may seem laborious to us technical sorts, but if your client is this way inclined, it’s in your interest to appreciate that while they may overlook emails, a printed invoice sent through the post has more of a chance of getting into that payments in-tray.

Run regular credit checks on clients and prospects

Services like DueDil offer a free and easy way to keep track of both clients and prospects, giving you early warning signs for those clients who are unable or unwilling to pay you on time.

Charge interest on late payments

In the UK, you’re legally entitled to charge interest under the late payment legislation.

Taking this route might damage your relationship with a client, but if they are persistent late payers it can be a firm sign that you’re taking later payments seriously.

Implement a strong invoicing process

A strong invoicing process is one that includes:-

Sending invoices out in a timely fashion on completion of work
Ensuring, and not assuming, invoices have been received by clients
Telephoning (not emailing) just before invoices are about to go overdue
Telephoning immediately when invoices do go overdue

invoicing process

Use effective payment terms

Some businesses state “Due on receipt” on their invoices. I’ve rarely come across a client who pays attention to this.

Most clients will include paying an invoice in their next payment run, regardless of when the due date is.

Find out when those payment runs are made – typically it’s weekly but can be monthly.

So instead of “Due on receipt” include a “Due within 7 days” or better still, a specific date the invoice is due to more effectively remind clients to pay on time.

Pay your own suppliers on time

If you have a strong payment routine to pay your own suppliers in a timely fashion, then you’ll strengthen both your companies reputation and internal values towards payments.

It’s a much more compelling way to convey such values to clients as opposed to the, “Do as I say, not as I do” attitude.

Pay On Time has some useful tips on promoting this attitude to your clients and suppliers.

avoid client late payments

Conclusion

You probably started your IT business to help others, not chase overdue invoices.

By making sure you have a strong set of processes around how you bill your clients, you’ll educate them into paying you on time, and earn more respect professionally too.

By making sure you have a strong set of processes around how you bill your clients, you’ll educate them into paying you on time, and earn more respect professionally too. Click to Tweet

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