10 Effective Ways to Get Paid in Advance (Before Your Invoice Is Due)Written by Bernard on October 02, 2017
One of the most difficult things about being a freelancer or business owner is that your payment doesn’t seem to be guaranteed. Many small businesses hinge on the thought of a successful cash flow.
Yet many people found out the hard way that their clients tend to be late in paying invoices. According to Simply Business, small businesses have to wait 72 days on average to get their invoices paid.
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72 days—that’s more than two months from the time the invoice was issued. The normal payment terms are usually Net 30, where the payment is expected 30 days after the invoice is issued.
Payment delays can seriously hinder your cash flow and for most businesses there’s nothing more important than getting paid on time. So if you’re looking for ways through which you can speed up payment, keep in mind that the most effective way to achieve this is keeping things simple.
The most critical communication that you will have with your customer is hands down, the invoice you send to get paid. A few additions and some simple adjustments can make your invoice more effective in increasing your chances of getting speedy payment from your customers.
Before outlining the most effective ways to get paid in advance, I cannot stress enough how important it is to ask customers or clients what they may “require” on their invoices before sending. To make things easier, I have put together a few important questions you can ask customers:
- Is it enough for to have an invoice number or do they also require a purchase order (P.O) number on their invoice?
- Would you require an employee identification number (EIN) on your invoice?
- Is a general description sufficient for your customer or would they like a more detailed break-down of all the services bought?
- Is it okay to direct the invoice to the customer or should it be directed to any other individual or company?
Simple questions like these will help you understand what your customer is expecting and thus avoid any delays in payment by having to recreate the invoice.
Now without further ado, here’s how to get your invoices paid on time or even well in advance.
1. Politely ask for payment upfront
One of the easiest ways to ensure you get paid in advance is to change your payment terms. Instead of agreeing by default that you’ll want your invoices paid within 30 days, you should ask for payment upfront.
That’s right—simply inform your customers that you’ll need 100% of payment to be submitted before you’ll even start work. This works great if you have history, experience and trust on your side.
Plus a simple please and thank you can make a big difference. Good etiquette is key in all forms of business communication so don’t forget to apply that to your invoices.
2. Ask for half (or partial) payment upfront
Now, of course, there are some customers who won’t be too eager to give you everything upfront. However, they may be willing to give you half or other partial payment.
The simplest is to ask for 50% now and 50% after you’ve delivered the goods or services. But you can also ask for 30% or even 70% upfront.
That way, both of you get what you want—you get paid in advance and your customer doesn’t have to commit fully yet.
Eliminate Payment Hesitation
Asking for an upfront payment from your client may create some hesitation and uncertainty on the clients end. If anyone is dealing with your services for the first time, there may be some reluctance to hand over money before the project is even done. That’s understandable.
Smaller projects with a more digestible cost may be easier to coax out the upfront payment. When you move up to more sizeable projects that may run into thousands of dollars, that’s where the hesitation comes into play.
There are a few methods to help alleviate some of this pressure with your client. It can help create mutual understanding and get the payment before the project has begun.
Probably the simplest solution is to have the payment in escrow. This essentially involves a 3rd party that holds onto the payment from your client until you have delivered on your promise.
The client will be safe knowing that his or her money is kept in a secure place, without you having the opportunity to bail with their investment. You are guaranteed security as well. Money will be there waiting until your job is completed.
Sites such as Escrow.com or Upwork help create the escrow account you can both agree on.
b. Project Breakdown
Sitting down with your client face-to-face and going over the details of the project can create some peace of mind. Covering the extent of the job at hand, what resources will be utilized, time span, and other intricacies will familiarize your client with what’s ahead.
Even if you are unable to meet your client due to proximity, it never hurts to have a conversation over Skype or other similar communication platform.
Build trust with the people you work with. Going over the project, and everything relating to it will give your client a sense of security and will show your competence.
c. Previous Clients May Offer Serenity
You may already have a list of satisfied clients you had worked with before. They may offer some solace in this situation.
Make sure that testimonials from your previous organizations or people you have worked for are visible to your new prospects. This can also help decrease the discomfort that associated to handing over large sums of cash before the project has commenced.
Implore your hesitant client to get in touch with your previous clients and ask about the work you have done. This can surely help reassure of your quality and your ability to deliver. You might even find the social proof is in the pudding, haha!
3. Offer 2/10 Net 30
This may seem like a lot of mumbo-jumbo, but it’s actually a normal way for businesses to offer a percentage discount to their clients.
In 2/10 Net 30, this is what it means: the business will give a 2% discount on invoices paid within 10 days. If it isn’t paid within 10 days, the full payment is expected in 30 days from the date of issue.
You can also make it a 5/10 or 10/10 Net 30—discounts which I’m sure will incentivize the client to pay faster.
4. Request payment before delivery
This isn’t really asking your client to pay their invoice before you start work. You’ve already finished the work (or are ready to deliver the goods).
However, before you’ll deliver, you are requesting the payment in full. You can do this by putting a password on a document or file that they are requesting or simply sending an email.
5. Send electronic invoices
One of the biggest reasons why clients pay late is that there are some friction points to their paying faster. Simply, if you’re sending your invoices by snail mail, your customer won’t receive it for a week or so.
If you send it electronically, the client will get it immediately. That means you’ll be much more likely to get paid in advance before your invoice is due.
6. Include payment options
If you include a link in your electronic invoice to have your client pay faster, it will help with most of the times. After all, your customer may be primed to pay you as quickly as possible, but there could be friction points to that.
It may mean going to the bank, or filling in paperwork, or even sending it to their accounts payable department.
The advantages of accepting online card payments are undeniable and a quick link in the electronic invoice can help clients pay you with just one click.
7. Add late fees
Getting your invoices paid before they’re due shouldn’t be such a huge problem, but many customers are simply late (or lazy).
You can help incentivize them by adding a late payment penalty or an interest fee if you will. This can be as small as 1% of the total invoice amount. What matters is that it adds a sense of urgency to your invoice.
The customer will know not to let things slide. Just make sure that your initial contract highlights this principle of late interest fee and ensure you restate them in your invoices. Customers should be readily aware of what the fee percentage is and when exactly it applies so it’s always at the back of their minds.
Just as it is important to charge interest fee for late payments, it is also a good tactic to offer some sort of incentives to motivate early payments. It might be worth experimenting with prompting customers to make early payments by offering a small discount, gift certificates, merchandise, credits or even the promise of future discounts.
Rewarding customers for their business shows appreciation and helps improve loyalty. Not to mention, speedier payments equal a better cash flow.
8. Send an invoice reminder (before you even send the invoice)
Another great way to get paid in advance is to prime your customers for paying early. One way to do this is to send an invoice reminder before you’ve even sent the invoice.
This ways by sending an email that lets the customer know that your invoice will be delivered on a specific day. That helps to prepare them and gives them time to sort out the payment.
9. Make sure you’re active with your invoicing
This point is about you, not about your clients. Do you have regular problems with getting your invoices paid before they’re due?
If so, it might be a reflection of faults in your invoicing system. If you’re doing invoices by hand or with downloaded invoice templates, it may not be the best.
You may need to get online invoicing software to make your processes easier. You may also see if there are any problems with your communication, to where your clients are confused in some way.
10. Cut off clients who are always late
It may also be that you have clients that are always late, or they just can’t be bothered to try to pay on time.
You’ve already extended them extra time to pay, but they still are late. Or they’re just late every single time with constant, changing excuses.
If that’s the case, you may have to consider whether you need those clients at all. After all, you’re in this to make a profit, and you can find other clients who are more able to pay on time.
This may not be the most pleasant idea, but you’re not a charity and you have to think in the long-term about what’s best for your business.
Get paid in advance with online invoicing
The best way to start having any change in the way you get paid is by making changes. If you want to get paid in advance by having your invoices paid before they’re due, then you need to implement these changes.
There are plenty of affordable options like Invoiceberry, which have proven to help businesses get their invoices paid on time. The benefits of being able to send your invoices through an online system far surpass those of traditional invoicing.
You can achieve professional looking invoices, easily customize them, pull out reports for more insights and enjoy many more benefits with online invoicing. Plus all the points highlighted above can easily be adapted and most even automated with the help of an online invoicing system.
With that, you’ll see greater cash flow and have more opportunities to expand and develop your business.