Fact, people do things that are benefiting them. This is especially true when these people are in business with you.
You choose to sell to your clients for profit and they buy your service or goods because of the value they see in it. A win-win!
Sometimes, especially when the going gets tough, people make choices that aren’t a win-win, but benefit one side only, their side.
If a client of your has $100 to pay its vendors and $150 of invoices to pay, someone will be left unpaid. Make sure it isn’t you.
Many businesses struggle to get paid (on time or at all) since they don’t use leverages available to them in order to do. Sometimes, using said leverages isn’t good for your client relationship long term, so use your best judgment, think what is benefiting your business more, payment today or another client.
It is best not to start with your strongest leverage, but to gradually increase the amount of pressure you apply, in order to get paid.
- Demand payment – stating to your client clearly that payment is due, or overdue can go a long way. If you outline politely that payment wasn’t received and ask your client to resolve ASAP, more often than not you will get paid. Many times, the client can forget or not be aware that invoice is due. Simply pointing out to that, will many times result in payment.
- Be Factual – you probably signed some sort of contract or had a verbal agreement. Your client knows that there isn’t a lot of room to maneuver around it. So get assertive, and ask for payment. Again, many times there might be a misunderstanding regarding payment terms and dates outlined in the agreement.
- Threaten to cut service – if you are doing business on a recurring basis with your client, there is a need for your service on their side. Mentioning that you cannot provide service without for so long without getting paid (since you have to pay your vendors as well, after all) can take you a long way. It is important to keep the communication professional, otherwise, you will find yourself arguing with an angry client about your communication style and not the fact they didn’t pay you.
- Cut their service – there is a big difference between a threat and an action. If they won’t cave in and pay the money owed let them feel how life is without your service. There is always a concern that they will be OK with not having your service. But, you wouldn’t want to give your stuff for free anyway. Many times, even a day of limited service can make a difference and put you on the top of client’s to-do list.
- Take legal action – depends on where you are, there are different steps that you can take, but involving collections agency or a lawyer can motive many debtors to pay you. For obvious reasons you want to avoid this step as much as possible since it is costly and you lose a client. Many times, strong official letter from 3rd party will do the trick, prior to escalating to any serious steps.
Collecting payments isn’t always easy or pleasant. However, if you don’t want to be jammed you must make the client understand that paying you is a priority and in their best interests.
After all, if you act like that overdue invoice isn’t a big deal, why would your clients lose sleep about it?
Having a well-defined collections process, with escalating communications will help you to get paid faster and limit the number of times you will have to exercise your leverage. Automation of the process will help you to save hundreds of working hours along the way.