One of the most difficult things about being a freelancer or service business owner is that getting paid isn’t always guaranteed.
Why? You often you have to deliver the service or piece of work first and then submit an invoice based on pricing you’ve set.
And according to Simply Business, small businesses have to wait 72 days on average to get their invoices paid — that’s more than two months from the time of issue!
What is Net 30?
The payment terms for invoices are usually Net 30, where the payment is expected 30 days after the invoice is sent. But if your invoices are paid late, your cash flow will be diminished, and you could have real problems meeting your financial obligations.
If that’s the case, then you need to find ways to get your invoices paid on time — or, even better, in advance.
1. Ask for full upfront payment
One of the easiest ways to ensure you get paid in advance is to change your payment terms. Instead of agreeing by default that you want your invoices paid within 30 days, ask for full payment up front.
That’s right—simply inform your clients that you’ll need 100% of payment to be submitted before you start work.
The catch? This tactic works best if you have history, experience, and trust, with clients on your side. If you’re just starting out, other strategies could be more effective.
2. Ask for half (or partial) upfront payment
Of course, some customers who won’t be eager to give you a full upfront payment, especially if you haven’t worked together before. However, they may be willing to provide half or other partial payment.
The simplest ask is 50% upfront and 50% after you’ve delivered the goods or services. But you can also ask for 30% or even 70% upfront.
That way, both of you get what you want—you get paid in advance, and your customer doesn’t have to commit fully to paying you without seeing the deliverables.
3. Eliminate payment hesitation
As mentioned, asking for an upfront payment from your client may create some hesitation and uncertainty. If someone is using your services for the first time, there may be a reluctance to hand over money before the project is done.
That said, smaller projects with a more digestible cost may be easier to coax out for upfront payment. When you move up to more sizeable projects that may run into thousands of dollars, more client hesitation comes into play.
A few methods can help alleviate some of this pressure with your client and ensure payment is secured before you dive into the project.
One of the simplest solutions is to have the funds in escrow, which involves a third party holding onto payment from your client until you’ve delivered work.
The client will be safe knowing that his or her money is in a secure place, without you having the opportunity to bail. You’re guaranteed the money is there waiting when the job is done.
b. Project breakdown
Sit down with your client face-to-face and go over the details of the project to create peace of mind. Even if you’re unable to meet your client due to proximity, it never hurts to have a conversation over Skype or another communication platform.
Cover the extent of the job at hand, resources required, estimated timelines, and other details to familiarize your client with what’s ahead.
Build trust with the people you work with. Going over the project and everything related to it will give your client a sense of security and show your competence.
You may have a list of satisfied clients who can offer reassurance to newer clients in this situation.
Make sure testimonials from previous companies and people you’ve worked with are visible to your new prospects on your website. This social proof can help decrease the discomfort associated with handing over large sums of cash before the project has commenced.
You can even offer a hesitant potential client the opportunity to get in touch with select previous clients and ask about the work you’ve done (once clearing it with those clients, of course).
4. Offer a “2/10 Net 30” discount
This strategy may seem like a lot of mumbo-jumbo, but it’s a normal way for service businesses to offer a small discount to their clients in exchange for early payment.
What is 2/10 Net 30? It means the business will give a 2% discount on invoices paid within 10 days. If it isn’t paid within 10 days, the full payment is expected in 30 days from the date of issue.
You can also make it a 5/10 or 10/10 Net 30—if you can afford to build them into your pricing, larger discounts incentivize the client to pay more quickly.
5. Request payment before delivery
This tactic isn’t asking your client to pay their invoice before you start work. In this case, you’ve already finished the work (or are ready to deliver the goods). But before delivery, you’re requesting the payment in full.
You can do this by putting a password on a document or file with the completed work, or send an email with instructions on payment and delivery.
6. Send electronic invoices with payment options
One of the biggest reasons clients pay past due? Friction points to paying quickly. Simply put, if you’re sending your invoices by snail mail — or by email without a direct call to action of where they can pay you — your customer is more likely to put off payment.
If you include a link in your electronic invoice to have your client pay faster, it means they don’t have to go to the bank, fill in paperwork, or download it to send to their accounts payable department.
7. Charge late fees
Getting your invoices paid before they’re due shouldn’t be such a huge problem, but many clients are late because your payment isn’t a priority.
You can incentivize them by adding a late payment penalty — it can even be 5% of the total invoice amount. It’s important to communicate that this penalty exists and is easily avoided if they pay on time.
8. Send an invoice reminder (before you even send the invoice!)
Prime your customers for paying early by sending an invoice reminder before you’ve even provided the invoice. Remind them the invoice is coming and the payment methods you accept.
This notification lets the customer know that your invoice will be delivered on a specific day and gives them time to sort out the payment.
9. Keep active with your invoicing
This point is about you, not your clients. Do you have regular problems with getting your invoices paid before they’re due?
If so, it might be a reflection of faults in your invoicing system. If you’re doing invoices by hand or with downloaded templates, it may be contributing to late payments. Consider getting an online invoicing software to simplify your processes and communicate to clients consistently.
10. Cut off clients who are always late
If you have clients paying you late on multiple occasions, you may have to consider whether you need those clients. After all, you’re in this to make a profit, and you should be able to find other clients who are more able to pay on time.
Cutting off clients may not be the most pleasant idea, but you’re not a charity, and you have to think in the long term about what’s best for your business.
The best way to create change in how you get paid as a freelancer or service business owner is by making changes. If you want to get paid in advance by having your invoices paid before they’re due, then implement a few of the above ideas.
With that, you’ll see greater cash flow and have more opportunities to develop and grow your business. Win-win!
About The Author
Uwe is the founder and CEO of online invoicing software InvoiceBerry. He’s been active in the tech scene for over 15 years, with a passion to improve the lives of small business owners and freelancers. A version of this post was originally published on the InvoiceBerry blog.