Billing clients is about communication, not invoices
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Communication is the key to every relationship. The better you can communicate, the more comfortable the other person will be. That’s just as true in professional relationships (between you and a client or you and a business partner) as it is in romantic relationships. And, the better you can explain your process (from discovery call to exit survey), the more likely it is that your client will stick to it, be happy with the service you provided, and pay your invoice on time.
Invoices are the culmination of all your previous conversations (including your contract) with your client. They aren’t the entire bill process (aka Accounts Receiveable process). They don’t exist in a vacuum. The more you explain your billing process to your client, the more comfortable they’ll be when they receive your invoice (and less likely to drag their feet paying it).
What you should be communicating:
Final amount: How much you’re charging is clearly the most important part of an invoice (to both you and your client). Don’t be bashful about the price. You’re a knowledgeable professional and that’s what you’re charging. If you bill hourly and can’t give them a hard number to expect, at least give them an honest estimate of how many hours it’ll take.
How long they have to pay: Many small business owners don’t discuss how quickly smaller transactions need to be paid off. They just throw a ‘Net 10’ on the invoice and wait for it to be paid. Then, clients wind up paying whenever they feel like which is usually whenever they feel the benefit of your work. In the tax prep industry, that’s when they get their refund (three weeks after filing!). In your industry, that could be months later. Discussing payment terms before beginning work will weed out the bad clients that will drag out paying your invoice.
Before or after work: Clients will almost always assume that you’ll invoice them after the work is done and in their hands. If you require a deposit, retainer, or maybe even the entire amount upfront, let them know at the same time you mention your price estimate (whether that’s on a phone call or an email). Also, I’m a huge advocate of getting paid upfront. If you aren’t already, consider getting a deposit on your next client project.
How often you’ll invoice: Recurring or ongoing work can be billed weekly, monthly, quarterly, or by milestones. The more frequently you invoice, the better your cash flow. But, like whether you bill before or after the work is done, your clients will always assume you’ll invoice them less frequently.
Consequences of late payments: You need to be very clear with clients, if you charge late payment fees, interest, or stop work when invoices are overdue. A surprise late fee will take your invoice from late to unpaid. You could always get a lawyer or collections agency involved, but that only makes sense for larger invoices where you can afford the fee and isn’t a guarantee you’ll get paid.
THIS WEEK’S ACTION ITEM: If you have your prices on your website, add your other payment terms. And, make your payment terms clearer in your contract. That’s the only part your client cares about anyway.
Have a good weekend and stay safe!
Michael Eckstein