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How to Decrease Late Payments From Clients

Updated on October 18th, 2021
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Service providers of all kinds know how irritating late payments can be.

There’s nothing more annoying than having provided a service and then hearing excuses like “The check got lost in the mail.”

Fortunately, there are several things businesses owners can do to decrease the chances of late payments happening. Here are just a few.

Always have a contract.

Whether you’re working with corporations or mom and pop shops, you should always have a contract signed. At the very least, contracts should show the scope of work and payment terms.

Do not ever start working without a signed document that states how much you’re being paid and when.

Negotiate contract terms if necessary.

Chances are if you’re working with corporations that they have their own contracts that they use. If this is the case, make sure to review it carefully for payment terms. If there’s anything you don’t like, don’t be afraid to bring it up.

Charge a deposit.

Depending on your business and clients, you can decrease late payment fees by charging a deposit.

If a client gives you push back, let them know the deposit ensures that they have secured time on your calendar for their work.

Charging a deposit is also a good litmus test. If they are willing to pay it, then it’s less likely the rest of the payment will be late.

Start charging late payment fees.

One sure-fire way to decrease late payments is to institute late payment fees. How much you charge and when should be laid out in the contract.

For example, you could charge a certain percentage after X days. Or, you could charge a fixed dollar amount. The more time passes, the more the fees are accrued.

If a client doesn’t comply, you must charge the late payment fee. This shows them you aren’t messing around.

There’s no point in threatening with a late payment fee and then not actually charging it. The latter just shows that clients can do what they want.

Stay on top of payments.

Part of the struggle with late payments is that sometimes it’s hard to keep track of the money. This is especially true when you’re juggling multiple clients.

Trust me, I know. When I was traveling a lot earlier this year it was hard for me to stay on top of the business financials.

That’s why my assistant and I had to create a system that worked for my personality type. In my case, that looks like a spreadsheet that tracks what I’ve done and what I am to be paid.

You can also use online invoicing services to help you stay on top of the money that’s coming in and when.

Send invoices out twice a month.

Businesses often get one giant lump of payments once a month. The problem with that is if a client is late in paying, it may mean you don’t have enough money to pay bills.

One way to ease this is to invoice twice a month instead of just once. The same way you get a paycheck every two weeks is the same way you should invoice.

This helps ensure there’s always cash flowing so you can pay your bills. It also helps decrease late payments because clients know what to expect.

Again, this should be laid out in the contract.

Automate the invoicing process.

A big reason clients send late payments is because the business owner isn’t sending invoices when they are supposed to.

Business owners get busy and invoicing isn’t top of mind a lot of the time. The way to solve this is to automate the invoicing process.

There are several invoicing services that allow you to send invoices out automatically each month. If your fees for clients are fixed, then this is a good option to use.

These services also help automate the follow up process. This alone can ensure you avoid getting late payments.

Delegate the invoicing process.

If you don’t have fixed amounts for invoicing, you can delegate the process. You can also do this if you need to itemize things on invoices.

The first thing I hired out in my business was a virtual assistant to take invoicing off my hands. We have a system where she knows what to invoice and when.

This has saved me time and decreases late payments because invoices always go out on time.

Make it easy to pay you.

The easiest way to decrease late payments is to make it easy to pay you. That means you need to offer multiple ways for clients to pay for your services.

In fact, if you have the control in how you’re being paid, always go for the easiest routes. This includes credit cards, ACH transfers and auto payments.

Get Added to Payroll

If you’re working with large companies, sometimes you need to go through their payroll to get your payment.

Many of them now offer ACH transfers for contractors, so make sure to ask about this during the negotiation process.

What to Do If You Have A Late Payment From a Client

Despite taking precautions, sometimes you will still have to deal with late payments.

We already state how you can institute late payment fees, but there are other things you can do as well.

  • Make sure to follow-up.
  • If they disappear, find their boss or the accounting department on LinkedIn.
  • If you have a social media following, you can threaten to call them out publicly. This worked for a colleague of mine and she received payment immediately.
  • Call instead of email.

These are all some of the ways you can get your client’s late payment in the bank. Hopefully, if you institute some of the tips in this article, you won’t have to use these recourses.

The bottom line: Take control of how you’re paid.

You don’t always have control of how you are paid by a client, which is why you need to offer different options.

With that being said, your goal should be to move your business in the direction where you do have control.

For example, I don’t always have control with my freelancing business because I’m dealing with corporate accounting departments.

As a result, I’m working on boosting the coaching aspect of my business where I have complete control of how I am being paid.

While it doesn’t happen overnight, it is something to consider as a business owner. You want to build leverage, especially with how you’re paid.

Amanda Abella

Amanda Abella

Amanda Abella is a Millennial Finance Expert that helps people understand their finances and eliminate all bad debt. She wrote a book, Make Money Your Honey. It is a powerful guide on how to have a better relationship with work and money. You can actually start building an extremely profitable business around the things you're passionate about.

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