When clients pay late, it can cause serious problems in other parts of the business. You might struggle to pay yourself, your bills, or your contractors. Cash flow issues can ruin a business. That’s why it’s crucial to encourage timely payments. Your job is to send out invoices quickly and make it easy for clients to pay you. Once they have the invoice, it’s up to them. Here are some ideas to motivate your clients to pay on time or even early.
Incentive #1: Pay on time, avoid late fees.
Preventing a late fee encourages clients to pay on time. A typical late fee is about 5%. You don’t want the fee to be so high that it feels unfair, but it should be enough to discourage late payments. Include your late fee in the contract terms. As the due dates on your invoices approach, remind your clients that a late fee will apply if they pay after 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
Offering 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.