I often come across service providers who are finding it difficult to get paid. This got me thinking about the psychology of payment.
There are clearly two sides to this particular coin – us and the client. We can be as much, or more, to blame as our customers for not getting paid, because of the way we think and act.
Firstly, as Brits we are sometimes embarrassed to talk to clients about fees and payment. Some business owners hide behind hourly rates, which means there is no upfront agreement about exactly what the client will be expected to pay. This means it is highly likely there will be disagreement and therefore delay in payment. Not only that, but disagreement about fees can leave a bad taste in everyone’s mouth.
Secondly, many service providers are slow to invoice, which means clients receive bills quite a long time after they have had the service. This sends a message to the client that the supplier is probably pretty well off and so doesn’t need the cash quickly (or the invoice would have been sent more promptly). Consequently it is more likely that payment will need to be chased.
Other suppliers do not make it clear what their payment terms are. Now, it is in clients interests to delay payment as long as they can (especially at the moment when many businesses are finding cash flow difficult) so if you are not clear on payment terms you cannot be surprised when payments don’t come through. Make sure your letter of engagement clearly states what your payment terms are and re-iterate these terms on your invoice.
Further to payment terms ask yourself the question ‘Am I a bank?’ If the answer is no (as I expect it is for anyone reading this blog) only give credit if it is absolutely necessary – and then ensure there is some allowance for interest in the price you are quoting! Otherwise, make your payment terms ‘payment on receipt of invoice’. You probably won’t get paid immediately but at least you can chase earlier.
I know business owners who don’t like chasing for payment, even if they have agreed a fixed price, invoiced promptly and have clear payment terms, because they think their good clients will think badly of them. This, in my opinion, is the worst ‘sin’ of all. Firstly, GOOD clients pay as agreed in the contract – a good client is not one who bitches about the agreed price and then fails to pay promptly. Secondly, we are business people who should expect to be paid for a good job done, so there is nothing to be coy about when it comes to asking for what you are legally and morally entitled to!
So, to recap:
1. Agree clearly with your client the exact terms of the engagement both in terms of job to be done and fee to be paid.
2. Bill as soon as the job is complete.
3. Be clear on your payment terms and give as little credit as possible.
4. Be professional! If money is owed to you do not be coy about chasing for it.