For many small businesses and entrepreneurs, one of the most important things that you will learn to do is how to ensure that your clients pay invoices on time. For many business owners unfortunately, it only takes getting burned by a client once to understand that there are steps that you should have taken to guarantee that payment. Luckily, with Huntington Group, we offer a variety of bookkeeping and accounting services to ensure that your business has an invoice collection system in place.
But there are a few things that you can and should do on your end to ensure that your clients pay invoices on time, every time.
Create and Sign a Contract
It seems to be that more often than not, the businesses that get burned by a client skipping out on a bill are those businesses that work as freelancers. This is because most established businesses implement contracts that lay out all of the services or goods that are to be delivered, a time frame for delivery, a method of delivery, and finally the total amount of due by the client.
What to Include in a Contract to Ensure That Clients Pay Invoices
As mentioned, there are a few key details that should be included in any business contract to ensure that all parties involved have clear expectations of the deal.
Deliverables
Deliverables refers to any work or product that the customer will receive as a result of your agreement to work together. If you are a writer, your deliverables should outline how many words or pages the content of the work will include. Be sure to include as much detail as possible so that there is no confusion later on.
Important Deadlines
In addition to detailing everything that comes included with the agreement, you will also want to outline a timeframe for the completion of the project. Is this a one time project to be completed on a specific deadline or is this a recurring regular service.
Rules for Revisions
If you are providing a creative service where the customer may want to request revisions, it is important to layout how many revisions you will allow and what the process of completing those revisions will look like. You may decide that it is unreasonable for your client to request 5 revisions due to the cost of time or materials.
Contact Information
You never want to enter into an agreement with any individual or business entity without requesting their contact information (name, address, phone number).. This will allow you to collect on your invoice in one form or another if they decide to stop answering the phone. It will also allow you to file a claim in small-claims court if they refuse to pay an invoice.
Termination Clauses
For any project that is reoccurring, say on a monthly basis, you will want to include a clause that details termination of service. Giving your client one-month notice that you will not be working with them in the future gives them enough time to replace you with another service provider. It will also give you a heads up that they will cancel their service so that you are not left high and dry.
Intellectual Rights & Release Information
An intellectual property and release information clause ensures that your customers must pay your invoice in full before being able to use the work that you have provided them with. This gives you ownership over your work until you hand it over to them when they have made good on their payment.
Payment Terms
Finally, the payment terms will let both parties know what the total payment will be, and how that payment is to be made. A common practice is to include a clause that says all payments must be made within 30 days of the invoice date or else late fees may apply.
Remember to be as detailed as possible to ensure that you and your business have your bases covered.