Getting paid on time can be one of the biggest headaches a company faces, especially if they’re in the business of contract work. And the reasons for nonpayment or late payment are myriad: disorganization, poor communication, dissatisfaction, lost paperwork, poor financing…and the list goes on.
But you don’t need to feel helpless against this common issue. Research has shown that there are a few methods that can increase your percentage of on-time payments without getting aggressive. And Local Service Hero can help.
Let’s take a look at a few tried-and-true methods that are easy for any company to implement:
1. Set Up Payment Methods Upfront
Setting up a payment method prior to initiating service is the best way to ensure you’ll get reimbursed. Whether it’s taking their bank draft information or storing credit card info, the process is streamlined and automated for both you and your customers.
Local Service Hero makes this easy with our estimates. When you send a customer an estimate for service, it will have a button to approve and add their credit card. So you have their payment info on file to be billed after you complete service.
Once a service job has been completed, simply submit the payment and move forward. Our software also has options to force payment upfront. You can ask for a certain percentage to be paid upfront, or the full amount, or to be paid after service. However you want to set it up, is your decision.
No more chasing your clients down with unpaid invoices and payment reminders. In fact, as great as all the other advice is that we have to offer in this article, this one simple step: setting up payment ahead of time- is the most direct way to keep your books balanced.
Building rapport, offering incentives, and so forth- these are all fantastic ways to strengthen client relations and foster loyalty. But knowing without a doubt that you have the means to submit a payment simplifies everything for everybody.
2. Make it personal.
This isn’t just about building rapport; it’s about fostering a relationship where the customer feels personally attended to. Sure, it takes a bit of extra time and effort, and perhaps a discount or promotional deal here and there. But when a customer feels taken care of on a personal level, you’ve tapped into the human tendency to respond in kind.
Most of us have a basic sense of honor and integrity that drives our motives. At the end of the day, as logical as we all would like to believe we are, our emotions have a significant impact on our decision-making process.
Think of it this way:
If I’m treated poorly, I may feel less obligated to “put my best foot forward” in my response to you, because your conduct has influenced my emotional state and clouded my reasoning. Likewise, if I feel like I’ve been treated very well, I may be compelled to “rise to the standard” and respond in kind.
Taking a moment to personalize your interactions will foster a sense of loyalty, wherein the customer wishes to do well by you and your company. That easily translates into timely payments and consistent business from them.
Local Service Hero can help you streamline your communications by helping you track leads, follow-ups, and customer correspondence. Our mobile app allows you to make notes in each client’s bio, so your whole team has access to important information about service provision as well as the most current communication between your company and your clients.
3. Demonstrate what you want to receive.
Again with concept of wanting your customers to respond to you the same way you’ve interacted with them: being timely with your communication- including invoicing- shows that you are trustworthy and organized. Additionally, an invoice received with plenty of advance notice gives them a chance to review their budget.
Giving your customers an opportunity to plan ahead is not only courteous, it’s just good business practice. If you yourself are a business owner, you know that expenses often need to be planned out months in advance.
Granted, if someone has sought out and utilized your services, one would hope they had already budgeted the cost. But offering reminders with plenty of advance gives them a chance to look ahead and ensure that your payment is scheduled in their budgetary output.
Make sure you set your invoicing to go out early and expect to wait up to 15 days for payment. Set up automatic reminders, if they are late, so it doesn’t take extra work for you and the extra reminder will increase the chances of your customer paying their bill.
Local Service Hero can streamline your invoicing with our mobile app that tracks due dates for each client. Simply add an invoicing schedule to the client profile and mark it as complete. Our software will do the rest.
4. Learn the customer.
If your customer is an individual, find out their preferred method of contact. Do they want a hardcopy bill for filing purposes, or would they prefer and emailed invoice, or perhaps a simple notification on their phone? Local Service Hero can help you provide all of the above, including service date reminders and past-due notifications.
When it comes to working with larger businesses, the communication may be a bit more complex.
While it’s good to be in contact with the higher-ups when it comes to building rapport with a company, they may not be the ones tracking the company’s finances. Take time to build positive relationships with the decision makers, but be sure you learn who’s in charge of what.
That is to say, make sure you’re sending your invoices to the right person. Communicating directly with the right team member can expedite the process of addressing invoices and receiving payments on time.
5. Use simple language.
In the business world, it is common to hear terms like “net 21” or “net 60.” The thing is, that lingo may not register with everyone. You can’t always know whether it’s an experienced accountant, or a fairly new admin staff member, who’s handling the invoices for a particular company you’re contracting with. It’s best to use common language that can’t be misinterpreted.
This is especially true for businesses whose customers are individuals. If you own a lawn care company, for instance, you may have contracts with large companies for whom you manage their commercial lots, in addition to several individual homeowners. Make sure the forms and notifications you send out are in plain language that can be easily understood.
“Your payment is due in 30 days,” including an actual due date, will stick in someone’s mind more easily than financial jargon. In addition to the myriad software programs available, a simple Excel spreadsheet can easily translate these terms into the forms you utilize for customer invoicing.
6. Utilize friendly follow-ups.
There is nothing wrong with sending a reminder email a couple of days after the invoice. All business owners know how crazy things can get in a busy office. This is especially true when email inboxes are jam-packed with issues and clients that are competing for priority.
Make yourself a bit more visible. While no one wants to be a pest, it isn’t impolite to send a follow-up about your due date. Simply use personable language in your message, and ask that they contact you if they anticipate a late payment.
7. Offer an incentive.
This concept goes back to the idea of making it personal. Show your appreciation, and they’ll be more likely to show theirs in return. Incentivising on-time payments can be easily tied into existing promotions your company may already offer.
For instance, you could give them early access to an upcoming discount if they pay their next invoice on time. Or perhaps you can offer 5% off next quarter’s billing, if this quarter’s invoices are all paid by their due dates.
You can also offer a discount for payments received ahead of time. Perhaps paying a month in advance offers a 5% discount, while paying a full quarter in advance takes 10% off of their bill. This keeps you in the black, and gives your customers the peace of mind in knowing they’re already settled up for upcoming service provision.
Talk with your billing and marketing departments, and get creative. Again, making your customers feel like they’re being rewarded will reward you with timeliness and loyalty.
8. Utilize automated communication.
We’re all aware, these days, that there are plenty of companies and software applications that help you track leads, follow-ups, scheduling, and so forth. Many of these platforms are also equipped to send out reminder texts and emails for invoicing as well.
Research has shown that these methods are effective at increasing the amount of on-time payments a given company receives. The app we offer at Local Service Hero is designed to streamline communication with both one-time and long-term customers.
As much as we’ve automated the world we now live in, there are still myriad transactions that only take place in response to a human being clicking the “send” button. Pre-scheduled payment reminders help counterbalance the human error inherent in a busy workday, by the simple act of repetition.
9. Ask for a down-payment.
Not everyone is going to be amenable to this negotiation. Some want to see a finished product before they pay for it. This is especially true when it comes to products and services with variable costs, such as construction or software management.
However, this method does one good thing for the customer that also works in your favor: an up-front partial payment locks you into the provision of service. Start strong, prove your competence, and maintain consistent communication throughout the duration of the project.
Upon completion, not only will they have less money due than if they hadn’t provided a down-payment, but you can now back up your fees with your labor. Provide a detailed invoice that shows the total cost of work, what portion they’ve paid for, and what they still owe.
10. Be flexible with your billing wherever possible.
Let’s say you’re working with a smaller business who’s on a biweekly billing cycle, or a large company who’s on a quarterly billing cycle. One good practice is to have the conversation upfront regarding what payment schedule will work best for them.
If your company has the flexibility to only receive quarterly payments for a longterm project, that may open your doors to contracts that would otherwise not be feasible. Likewise, if you’re willing to work with an individual whose best option is to make frequent smaller payments, just be sure to maintain regular contact regarding due dates.
11. Be up-front with your expectations.
Let’s say you run a fairly small business that cannot afford late payments, or that you simply prefer running a tight ship with no loose ends in the accounting department. If you are unwilling or unable to be flexible with payment schedules, that is absolutely your right as the business owner. And your customers deserve to know your policies and expectations up-front.
If you’ve determined that the best practice for your business is to terminate service immediately after an invoice goes unpaid for 10 days, then let your prospective customers know that. It puts everyone on the same page right from the get-go, ensuring that you are more likely to attract clients who are willing and able to pay you on time.
12. Use contracts and late fees.
While taking a “punitive” approach may be less favorable than rewarding on-time or early payments, it is an effective way to deter clients who simply aren’t invested in financial responsibility. Again, Local Service Hero can help you set up invoicing and payment reminders, to help you keep track.
When it comes to creating a contract, you may want to seek legal advice beforehand, to be sure your verbiage is legitimate. We can help you set up e-sig capabilities on your app and your employees’s mobile devices, to cut down on hardcopy paperwork.
13. Cancel services if needed.
That’s right. Unless you’re under a contract that states otherwise, you have every right to discontinue your services until an outstanding balance is addressed in full. And you don’t have to be mean about it. A simple, “your services will resume as soon as X balance is settled” is perfectly sufficient.
This is especially important for smaller businesses like lawn care companies. On one hand, you may want to make a good-faith effort towards a trustworthy client facing an unforeseen circumstance. But it’s a disservice to your company and your employees to compromise your own budget by allowing invoices to get into the $ thousands while continuing to provide your service.