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If you work as a freelancer or run a small training business, then one of your biggest priorities will be managing your cash flow so that you’re not constantly riding that dreaded ‘feast and famine’ rollercoaster. Unfortunately, overdue or unpaid invoices can cause cash flow problems within a fairly short time frame for many small businesses. According to accounting software company, Xero, 60% of invoices are paid late and more than a third are over two weeks overdue.
So how can you ensure that you get paid on time, every time? We’ve put together five ideas that can help:
Have clear terms and conditions, as well as a contract with your client, from the outset
Every time you work with a client, you should have a contract that defines the work that you are being asked to undertake and any agreements between both parties, such as deadlines, etc. This will help to ensure that everyone involved in a training agreement is on the same page and that you share the same expectations about what you will deliver.
If you don’t currently have a document outlining your terms and conditions, do put one together. In this, you should talk about issues such as your payment terms, late payment fees, intellectual property, liability, and so on.
If you’re not sure where to start, search Google for ‘terms and conditions template for training services’ (or something along these lines) – this will give you an idea of what other trainers are saying, as well as highlighting free and paid-for legal services to write terms and conditions. You could try a free service like https://www.rocketlawyer.co.uk to draw up a basic document.
Once you’ve created your terms and conditions, it’s advisable – although not a legal requirement – to get them checked over by a solicitor. This will help you to feel more confident about setting clear terms of payment and for many of the eventualities that can arise when providing training services.
Charge a deposit
To help minimise the risk of not being paid for your training services, especially by a new and unfamiliar client, you could ask for a deposit to secure your time or even charge 50% upfront. Another option is to break your fees into staged payment that are to be paid when you have met certain pre-agreed milestones throughout the project.
There are several advantages to this approach. Not only can it help your cash flow, but it can also help clients to manage their budgets and it spreads the risk of non-payment or non-delivery of services between you and the client, rather than you taking 100% of the risk.
Ask your clients if there’s anything they require on an invoice
To avoid a situation where an invoice is returned to you because it doesn’t meet all of a client’s requirements, it’s worth asking what your invoice should include before you send it.
For example, some businesses won’t process an invoice without a purchase order number that was raised when a service was enlisted. Other businesses require a very detailed breakdown of how a service was provided. It’s fairly common too for invoices to be handled by a specific individual or department within an organisation – this might mean your invoice has to go to someone you haven’t met before.
If you ask questions about what your invoice must contain from the outset, it can help to speed up your payment.
Use clear language on your invoices
Instead of using a financial term like ‘Net 30’ or ‘Net 60’ on your invoices to describe your payment terms, try to keep the language you use as clear as possible. People are more likely to understand and respond to a statement such as ‘Payment due within 30 days’.
Also, terms like ‘Payment on receipt’ might not be advisable as it gives the recipient some wriggle room to argue that they didn’t receive your invoice on the day you sent it.
Send your invoices as soon as possible
Once you’ve completed a training commitment, send your invoice out straight away while your work with the client is still fresh in their mind. Invoices that get sent out quickly are often paid quicker. On the flipside, if you wait weeks to send out an invoice, your client might assume that you’re not in a hurry to get paid.
Unfortunately, for most small businesses the issue of a late payment is all but inevitable at one stage or another. Your clients may be facing cash flow issues because they’re waiting on payments. These strategies above can go a long way towards securing payments on time, every time. Do let me know how you get on in the Comments section below and if you have any strategies for getting paid on time that I haven’t mentioned, I’d love to hear them.
Also, keep an eye out for next week’s blog when I’ll have five more ideas for getting paid on time, every time!