Credit control shouldn’t just be restricted to bigger businesses. In fact, the process of agreeing, monitoring and collecting money should be part of day to day life of every business.
Working for yourself brings many challenges, struggles and time is ever scarce. However, keeping an eye on your finances, especially cash flow can make or break your business. The saying “cash is king” is never more important than when operating a business.
As a freelancer, you may think this is easy – you issue invoices to your client, or agency and they usually pay in a set amount of time. However, what if your work is spread over many smaller projects? Can you afford to sit back and assume your invoices will be paid so regimentally, especially if you are working for lots of small businesses.
When you take on a new customer, being clear about your payment expectations and agreeing a process can make life easier when it comes to sending an invoice for your work.
Five tips for credit control
Essentially, no matter what type of business you operate, credit control can be simplified as follows:
Agree payment terms upfront
Agreeing payment terms with your client during the contract negotiations will help set expectations and ensure both sides are clear about the process.
You and your client should both have a clear understanding of what work will be done, how much it will cost and how long it will likely take to complete.
Agreeing what payments will be made and when will ensure your customer clearly understands the process. For example, you may require a payment at various intervals in the contract and this must be set out clearly to your client.
Including this information as part of the contract and getting your client to review, agree and sign the contract will help with difficult conversations down the line.
Raise an invoice promptly
Generally, if you don’t raise an invoice for the work you have done, you won’t get paid! Sounds obvious, but sending an invoice to your client as soon as the work is completed will mean you will get paid quicker.
When you send your invoice, tell the client what work the invoice relates to, when it’s due, how much it is and (most importantly) how you would like it paid. Again, being clear and concise at this stage will mean there are no reasons for payment delays.
Sending regular reminders
Now that your client has your invoice, don’t assume that a payment will be on it’s way to you. Without regular reminders to your client, it could mean that you are always on the bottom of the pile when its time for paying bills.
Follow your process for chasing late payments
Having already agreed your payment terms, following through and chasing overdue invoices is a must for any work you have completed. In many cases, a quick phone call to your client will suffice to get them to make a payment.
However, if you invoice remains unpaid, you may have to escalate and take further action to recover the money. However, be conscious about how any action you take could affect your relationship with your client, especially if you wish to keep them for further projects. Charging interest on the balance outstanding or halting further work will certainly help with getting paid quicker and is usually a better method than threatening with solicitors or court.
Process the payment
Nothing is more frustrating for your client than them paying your invoice but continuing to be chased for it. Therefore, once you have received a cleared payment, allocate it to the invoice as soon as possible.
Finally, regardless of when the client has paid, it’s always good practice to acknowledge their payment and thank them for it. This is good customer service and if you feel it’s appropriate, does allow the possibility of exploring future projects with them.
Credit control is about common sense. Getting a clear, transparent process in place with your client upfront ensures you are both happy with the process and usually leads to your invoice being paid quicker.