Disclaimer: I am NOT a lawyer or an accountant. The information in this blog is intended for educational purposes only and is not legal or financial advice. Be sure to reach out to a licensed professional who can help you determine the best course of action for your specific money needs.
When you set out to start your own creative business you dreamed of…
What you probably didn’t anticipate?
Feeling like a collections agent every time you’re notified of yet another “PAST DUE” client invoice.
Chasing down payments doesn’t just cause unnecessary stress or take you away from other pressing things on your to-do list. It can also be a huge bottleneck in your business; stunting your growth and disrupting your cash flow.
If you’re not consistently getting paid on time, your financial woes will eventually seep into your personal life, making it harder and harder to keep up with bills and expenses!
Not exactly what you had in mind when you began your entrepreneurial journey.
The good news is, late payments can become a thing of the past – without having to bring on a full-time bookkeeper.
The key is to be clear, timely, and consistent when it comes to payment requests.
In this blog, I’ll introduce you to 3 simple but impactful ways to transform your payment process. These strategies will ensure you can get paid like clock-work each and every time, so you can focus on the creative work you do best and watch your business flourish!
This may sound obvious. Of course, you don’t want to make it hard for people to pay you!
But all too often businesses do exactly that and make their clients jump through hoops to submit payments without even realizing the barriers they’ve created!
I know you may prefer to receive payments one way (yes, cash is nice), but just because it works for you, doesn’t necessarily mean it’s easy or accessible for your client.
Consider offering flexible payment options like…
…so they can pay you without having to bend over backward!
Beyond the method of payment, you may also want to lean into tech that can make paying you on time a literal no-brainer!
Many software options (I highly recommend a CRM such as Dubsdo or Honeybook) offer features like auto-pay. When your clients opt in, you’ll get security and peace of mind while they can simply set it and forget it!
The easier you make it for clients to pay you, the less likely you are to have issues!
Yes, often credit card processing fees and the cost of any software you decide to use will involve an investment on your end. But, I consider it the cost of doing business. Better to get paid consistently and profit just a bit less than to chase down payments every month. Or worse — not get paid at all!
Every project needs to have clear payment terms!
This is all about making sure your expectations are clear so that you are protected financially.
Payment terms are like the rules of the money game. They’re the agreed-upon guidelines that make sure everyone knows when, how, and how much to pay.
These terms cover things like:
Oh, and let’s not forget about the not-so-fun stuff like late payment penalties or interest charges.
It’s all about keeping things fair and making sure everyone’s on the same page when it comes to payment details.
You need to include a specific contract and a clear payment schedule for every single project. I know it may seem tedious, but if you don’t have it in writing, you’ll never have solid ground to stand on when it comes to collecting the money you’re owed!
In addition to being extremely clear about your payment terms, you’ll also want to map out your project timeline and milestones, especially if payments are due at specific project-based intervals.
This is where a clear payment schedule can come in handy.
There are lots of options when it comes to payment schedules.
Before we jump into potential project schedules you may choose to include, I’d be remiss if I didn’t address the option of getting paid upfront.
Of course, this approach ensures you aren’t owed any payments for work you’ve completed because you won’t begin work until the project is paid in full.
In addition, while getting all of your payments upfront may sound ideal, the truth is, while this may work for some business models, it isn’t always realistic for all businesses, industries, or clients.
Pre-payment can be a tempting option worth considering and implementing, but remember to weigh the pros and cons carefully.
Just know it’s not a magic bullet to solve all your invoicing woes.
It’s all about finding the right balance for your creative business!
If pre-pay doesn’t feel like the right move for you, you may instead consider other options like requesting a deposit before work begins as well as payment along the way. Some businesses may also request payment after the product or service is delivered.
But, you do need to be super clear about your payment schedule expectations!
I highly suggest you include the following in your payment schedule:
The less vague your payment schedule is, the easier it will be for your clients to follow your lead, meet your expectations, and pay you!
COO Tip: Want an easy, proactive way to remind clients you’ve hit an invoice milestone? You can do this with a quick message that celebrates your project progress so far. This is a natural segue into a reminder that you’ll be issuing an invoice for that milestone per your contract terms and payment schedule. When you do this tactfully, it lets them know to keep an eye out for the bill (often people don’t NOT want to pay you, they just overlook the invoices). Plus, they get an opportunity to ask questions or raise any concerns.
The best approach to getting paid on time?
Be proactive, timely, and consistent!
This is where billing automation can make a world of difference. Not only do automations take the pressure and the workload off your plate, but they also ensure that your invoices are way more likely to actually get paid on time!
I recommend sending proactive reminders before the invoice is due (you might choose a week in advance or something like 3 days just to give your clients a heads up) as well as on the day it’s due! These reminders should include a link with easy access to a client payment portal so they can take care of it while it’s top of mind!
You can also automate reminders when the payment is a few days past due and then each week so nothing gets overlooked.
Automated reminders seem less aggressive and are easier on you!
Plus, most people are super motivated to take care of a payment once the word “overdue” is attached, so it minimizes the number of personal follow-ups you have to do!
This is where your follow-up system comes into play.
Unfortunately, this isn’t really something you can just set up once and execute. It will need to be a bit more personal because the issue is client-specific.
So the elephant in the room becomes:
“WHEN do I follow up on an outstanding balance?”
In my experience, I feel like it’s best to reach out when the invoice is 1-2 weeks overdue. Too soon can feel a bit aggressive, and too much longer and you risk damaging the client relationship or facing more resistance in collecting the payment.
The next natural question is,
“HOW do I follow up on an outstanding balance?”
COO Tip: On the off chance that things become REALLY overdue or you are ghosted, you will need to decide how to move forward. You can either cut your losses and let go of the debt or seek help from a lawyer or collections agent to get it back. The choice depends on how much money is at stake. If you go the legal route, make sure you have all the necessary paperwork and contracts ready. Hopefully, it never comes to that! But if it does, reach out to the non-paying party, let them know you’re considering taking action, and give them one last chance to pay up. Just remember, involving lawyers or collection agencies takes time and money, even if they only take a percentage of what they collect.
At the end of the day, even the most lucrative businesses can face hard times if they don’t prioritize timely payment collection. No matter how much revenue you generate, the inability to collect what is rightfully due can significantly impact your financial stability and overall success.
By proactively implementing the right strategies to ensure prompt payment, you not only protect your business but also enhance the client experience, fostering stronger relationships and smoother transactions.
I know it can feel daunting to tackle, but I urge you:
Don’t wait any longer to take control of your creative business’ finances.
I offer 90-minute Clarity Calls (click here to learn more) that can help get your creative business’ finances back on track!
Seriously– I once helped a client recoup over 6 figures of unpaid invoices by:
Sound like something you need too?
Together, we can create a custom plan tailored to your specific needs and help you regain control over those unpaid invoices while making sure history doesn’t repeat itself.
Remember, one of the keys to sustainable growth for your creative business lies in efficient payment management.