One of the most important things you’ll ever need to do as a business – is get paid. Invoicing your customers can be a difficult experience, but with the help of a bookkeeper and an automated system like Xero, you can make sure that your customers automatically get the invoices they need, as well as the reminders required for chasing up payment.
Unfortunately, while setting your pricing structure and agreeing on the fees your clients will pay is great – it doesn’t do much good if you can’t ensure that the money you’re owed is moved quickly from their account into yours. All late payments from customers don’t necessarily come from laziness or malice. Sometimes, people get confused about how they’re supposed to pay, when they’re supposed to pay, and more.
If you want to make sure that you’re getting your money quickly and easily, then the first step is making sure that your invoices have these three crucial factors.
First things first, you need to determine when your client is expected to make their payment. The options for timing usually come in one of the following formats:
- Upfront payment: This means that 100% of the money you’re owed is expected to be sent before they get their product or service.
- Instalments: This means that a client pays some amount upfront, then makes another payment when the project has been finished. Sometimes people include midpoint installments to reflect the important milestone a project has hit.
- Royalties: This means that you get paid based on the number of products or services sold. For instance, when an author receives a percentage of each copy of their book that is sold.
- Payment after Invoice: This means that your client pays your money a number of days after they receive your invoice. Remember, for smaller businesses, the longer you make your payment terms, the more you can struggle!
Once you’re sure that your customer knows when to pay you, you’ll need to be certain that they understand how to send the money you’re owed. There’s nothing worse than receiving cash that you can’t use because it’s in a foreign currency or coming through a system that you don’t use. Make sure that you make your payment methods clear – they’ll usually involve one of the following:
- Checks – Checks are commonly used with bigger companies, for higher amounts of cash where fees from PayPal might add up pretty quickly.
- Cash – If you work with your client or customer in person, then you could simply accept cash in the amount that they owe.
- E-transfer or PayPal: If you work remotely with a client, then you can ask them to send payments through an e-transfer. These payments can be sent either by the client, or in response to an invoice that you create through the system.
- Bank or Wire transfers: Finally, if you’re working internationally on a larger project, then a wire transfer might be the right solution. There is an element of trust to consider here, however, as you will be required to send bank details.
What Happens If…
Okay, so you’ve told your customer when and how you expect them to pay, now you need to detail what’s going to happen if they don’t follow your instructions. This doesn’t mean threatening your client with violence or something else if they fail to cough up the money you’re owed, but it does mean including something in your payment terms that outlines what happens when payments are late.
For instance, you might include information about the late fees that your client will be expected to pay if their invoice isn’t paid by a certain date. On the other hand, you might stop working on a project, or retain the project you have been working on until the payment has been made.