Getting Paid by Your Clients: A Small Business Owner’s Guide

I’m excited to dive into a crucial topic for every small business owner: getting paid by your clients. This aspect of business can make or break your cash flow, so it’s essential to approach it strategically. Let’s explore the key elements of an effective payment strategy.

Establishing Your Pricing and Product Structure

The foundation of getting paid lies in your pricing strategy and product structure. Ask yourself:

1. Are you offering a recurring subscription?
2. Do you bill by the hour?
3. Is your pricing based on metrics determined after service delivery?

Your pricing model sets the stage for your entire payment process. For instance, I offer a subscription service for most of my deliverables. This approach streamlines the payment process, making it easy for my clients and me.

Choosing the Right Payment Method

Once you’ve established your pricing, consider how you want clients to pay you. In my business, I use CRM software, which handles proposals, agreements, and automatic monthly charges. This system eliminates the need for clients to remember to pay each month, reducing friction in our business relationship.

While this automated approach works well for many businesses, it may not suit everyone. The key is finding a method that works for you and your clients.

Transitioning Existing Clients to New Payment Methods

If you’re considering changing your payment method, don’t worry – it’s possible to transition existing clients. I made this switch, moving from manually sending invoices and reminders to an automated system. Over three months, I notified my clients of the change and provided them a link to enter their credit card details for auto-pay. This transition saved me time and improved my cash flow predictability.

Reducing Friction in the Payment Process

When onboarding new clients, minimizing any friction in the payment process is crucial. Every extra step, whether it’s visiting different websites or entering additional information, can create hesitation. By offering an automated payment option, you’re making it easier for clients to say “yes” to your services.

Addressing Common Payment Challenges for Small Businesses

For larger, enterprise-level clients, you should be prepared to adapt to their existing payment systems. They may have specific accounts payable processes that you’ll need to accommodate. In these cases:

1. Be explicit about your payment terms in contracts
2. Confirm their payment timeline during the agreement signing
3. Stay in touch with their finance team about upcoming payments

With smaller clients, you generally have more control over payment terms. Consider:

1. Requiring payment on receipt or within 30 days
2. Implementing late fees (check your state regulations first)
3. Setting up automated payments where possible

Staying on Top of Overdue Payments

Don’t neglect following up on overdue payments – this is crucial to maintaining a healthy cash flow for your business. Consistently late payments can seriously impact your operations and growth potential. If you notice a pattern of late payments, it’s time to take a closer look at your invoicing and follow-up processes.

Start by examining your current system:

1. Are invoices being sent out promptly and consistently?
2. Are your payment terms clearly stated on each invoice?
3. Do you have an automated reminder system in place?

If these basics are in order, consider implementing an escalation policy for invoices over 30 days past due. This policy might look something like this:

1. At 30 days past due: Send a friendly reminder email
2. At 45 days past due: Make a personal phone call to the client
3. At 60 days past due: Escalate to a senior team member or yourself for direct intervention
4. At 90 days past due: Consider involving a collections agency or legal counsel

Remember, the goal is to collect payment and understand why the client is consistently paying late. There might be underlying issues that, once addressed, could improve your relationship and future payment timeliness.

You should consider adjusting your terms for future projects for clients with a history of late payments. This could include requiring larger upfront deposits or shorter payment terms. Proactively managing overdue payments can significantly improve your business’s financial health and reduce the stress of chasing down late payments.

Understanding Payment Processing Fees

Many billing software options allow you to pass credit card processing fees onto the client. Some fees reaching over 3.5% can significantly impact your bottom line. Consider whether you’ll absorb or pass these costs on to your clients.

Project-Based Billing Best Practices

For project-based work, consider these strategies:

1. Require an upfront deposit (often 50%)
2. Set up monthly installments for longer projects
3. Use clear contracts outlining deliverables and payment dates
4. Avoid starting work without some form of upfront payment

Handling Resistance to Automated Payments

Some clients, especially for larger projects, may resist automated payments. In these cases:

1. Have a consistent billing approach
2. Present your payment terms confidently as “the way we do things”
3. Be willing to make accommodations for important clients, but don’t offer alternatives upfront

Remember, the key to getting paid consistently and on time is to:

1. Have a consistent approach to pricing and payments
2. Reduce friction for your clients as much as possible
3. Be clear and upfront about your payment terms
4. Use technology to automate and streamline the process where possible

Implementing these strategies will create a smoother payment process, improve cash flow, and reduce the time and stress of chasing payments. Remember, getting paid is not just about receiving money – it’s about creating a professional, efficient system that benefits you and your clients.

Need help getting paid by your clients? Book a free call, and let’s talk.