You know what is beyond a miracle for a small business, freelancers, or small businesses. Yes, it is getting paid before or on time. Sounds bizarre, right? Often invoices are not paid for months, and it upsets the cash flow of small businesses.
But, is there a way to manage this and eliminate this practice. Well, truth be told, no method comes with a 100% guarantee. However, the approach we are going to discuss can work 99.99% of the time for sure.
The first step to get a hold of your invoices is to invest in good online invoicing software. The second one is to charge late payment fees for invoices?
But why should you do this? Well, if you want to be rewarded with late payments after submitting work on time, then surely don’t use this method. However, if this doesn’t sound right, charging late payment fees is a must.
Why charging late payment fees is a feasible solution?
As the old adage says, time is equivalent to money; late payments are major roadblocks to business growth. Did you know a whopping 42% of freelancers deal with late payments, and 66% of businesses have a pile of unpaid invoices stored in their online invoice maker solution?
Are you now with us on the same page and convinced of charging late payment fees? Well, yes, it is undoubtedly the best way to get payments. Even if you are not using a full-fledged invoicing solution, you can even use an online invoice generator free of cost to manage the process.
But, if you are feeling awkward, you can always step to the other side to get an experience. Well, remember the last time you got paid your phone bill late and even the electricity bill—also, the best one, the high amount of interest charged on your credit cards.
Will late payment fees sabotage client relationships?
While every business aims to offer excellent customer services, most of them think twice when it comes to charging feed and end up compromising with delayed payments. But freelancers and small businesses tend to forget that maintaining cash flow is super important, just like smooth customer relationships. Luckily, your payment processing software can help you achieve it with ease.
Trust us; no one wants to burn a hole in his/her pocket. So when making contracts, you can use your online invoicing software to charge late fees. This will urge customers to pay on time and instill a sense of accountability in them. Besides, it gives a sense of urgency, and customers will be able to understand your needs better and pay on time.
Besides, you will no longer need to send follow-ups using automated invoicing software and suffer due to a lack of funds. Thus, charging late fees is surely a viable option when it comes to taking care of business health.
Can late payments cause legal trouble?
You can use your payment processing software to follow all the invoice guidelines. But, what when it comes to following legal guidelines? Well, charging late fees is completely legal, and you will not be landing in any trouble if you do so. But, make sure you don’t use it as a means to earn money via bad means. It will help if you are reasonable and work in accordance with your invoice amount.
You can choose to integrate a legal management module with your automated invoicing software and take legal laws into account. For instance, your amount is $2000, and you wish to charge $50 as late fees; it is fine. But, if you plan to charge an extra $50 on services worth $200, it can land you in big trouble as it is downright illegal.
The most important thing you will need to do is inform your clients before you sign a contract with them. Remember, this should not come as a surprise for your clients as it could permanently sour your relations. So write it as clearly as possible in your terms and policy. Also, make sure the client first reads the document, understands the pros/cons, and then only signs the document. Also, make sure you put in all the details in your payment processing software to avoid confusion later.
The right time to charge late payment fees
While we suggest being absolutely honest and straightforward with your clients, don’t make it the first thing you talk about. Yes, we understand the perils of poor cash flow, but you will need to be flexible with your customers.
Give your client to speak about what they think about this and let them communicate with you. If their reason is genuine enough, you can go off the late charge fees. This will help you build a strong bond with customers.
You might also face a few customers who will refuse to pay late fees and even act rudely. In this situation, you will need to be harsh with them and ensure that it does not become a recurring issue.
How much late fees is fine?
Coming to the interesting part, how to calculate late fees? Well, you will need to check with local laws and then decide the fees. The second thing you will need to take into consideration is charging late fees. Your first motive should be to get timely payments and not get extra revenue or bonus. Ideally speaking, a 1.5% interest rate per month on unpaid invoices is good.
If you are still wary of the whole idea, here are some alternatives you can try to make your efforts recognized and get paid on time. Luckily, you can automate all the processes with an online invoice maker.
1. Send gentle reminders
Sending reminders is a great idea but, unfortunately, not a sure-shot way to extract payments. Still, you can send them in advance to urge the clients to pay you faster. In addition, there can be a host of reasons that your client may have forgotten to pay you. Thus, you can automate reminders through your free online invoice generator free of cost and be done with your bit. In most cases, these reminders work well and get you paid on time.
2. Give clients access to multiple payment modes
Well, the modern client needs not one or two but multiple payment options. More options, more convenience, and faster you get paid. Luckily, you can integrate your online invoice maker with payment methods like a credit card, debit card, cash cheque, and other gateways.
3. Online invoicing to rescue
From sending reminders to clients to customizing invoices and keeping track of finances to handling clients better, payment processing software comes with a host of benefits. Besides, an online invoice generator free of cost can help you create invoices in less than 30 seconds. So whether you are traveling or having a walk in the garden, you will be able to invoice your clients faster and get timely payments.
4. Adopt a retainer-based model
Still, dealing with per-hour charges? Well, it is time you shift to a retainer-based model. It is particularly useful if you deal with multiple clients. Not only will it help you achieve client goals, but it will also help you predict your income over a period of time.
Besides, it leaves no room for surprises, and your clients will also have a better hold of their finances. You can decide on this and then customize your payment processing software accordingly.
5. Have a personalized payment schedule
Transparency is foremost when it comes to managing clients. You can strategize and make a schedule with your automated invoicing software and then offer a few plans to your customers. But, make sure you understand their needs and make them a priority. Having crystal clear conversions will help you avoid late payments and do away with that bundle of unpaid invoices.
Some will prefer making payments in installments; some would like to make full payments. If you can figure out a plan that benefits both parties, it will lead to healthy relations with your clients and good cash flow for your business.
6. Put your billing system on autopilot
When you don’t send your invoice on time in the first place, how can you expect the client to send you timely payments? This issue will be further escalated if revisions are required. Moreover, sometimes you might end up filling in important details.
But, when you use automated invoicing software, you will reduce errors to a great extent and even get paid on time. Besides, with fewer mistakes, you will get the time and the experience to manage your transaction data better.
7. Build the foundation right
Having good client relationships will lay the foundation of your business. Not only will you be able to get access to good opportunities, but you will also get repeat orders. Besides, when you have good relations, you are more likely to get paid on time too. Thus, work on your communication, have a good online invoice maker, and provide good customer services to bond better with clients and achieve goals better.
8. Figure out a payment strategy
You can easily streamline your strategies and collect payments in a better manner with an online invoice generator free of cost. It can include the number of days you will wait to send out reminders and what is the process you will follow if the client refuses to pay you. Will you involve legal authorities? Answer all these questions to devise a strategy.
9. Give out early payment discounts
Just like late payments should be penalized, early payments should be rewarded; you can set conditions on your online invoicing software and offer them a small discount for doing so. It will act as a good incentive for your clients to pay you faster, and you will be able to eliminate instances of late payments, and you will no longer have a list of unpaid invoices in your online invoicing software.
So, this is how you can avoid dips in cash flow and use an online invoice generator free of cost to manage your finances.
Cash forms the backbone of any business, and you will need to take these measures to keep your business up and running. However, if you are still thinking of purchasing the right online invoice maker solution you should use for your business, let us help you find one. Feel free to contact us at email@example.com or +1-805-491-9393.