Business is booming. The phones are ringing off the hook. Referrals are flowing and you’ve just been awarded your next contract. Now you find yourself in a pickle; you have overextended yourself. All your ongoing projects called for a cash outlay. If you are like me, you’ve put off collections and following up on accounts receivables because you’ve been busy working in your business and your clients are all paying late. Past due invoices create a significant cash flow burden which impacts your ability to do business. Without cash flow, it’s only a matter of time before you and your business go kaput!
All businesses, but especially small and micro, rely on fast and timely client payments to keep going. We state payment terms in bold font on our invoices: due upon receipt, net ten days, net thirty days, etc., hoping that clients will adhere to them. But most never do and we’re left being the bank—incurring interest charges or late fees for payments, more stringent terms from facilities or recruiters that have been paid late, and lost work on account of not having enough cash flow to advance for bigger projects that require large outlays of cash we should but don’t have.
What about advances? Some clients pay in a timely fashion but quite a few do not. Today, many clients don’t even factor in an advance payment and expect to be billed in full at the end of the project. Some who seem to always be in a rush to get the project executed have finance departments that don’t have a clue what that term rush means. Often, they are not playing with the same playbook as the research department and treat the advance invoice as just another invoice. I’ve learned that rush is a relative term.
I’ve heard from myriad colleagues over the last couple of years and their cries have gotten louder in the past six months that clients have been taking more than ninety days to pay, creating havoc with cash flow, squeezing QRCs just like you would a lemon. How then might we ease the squeeze and end that cycle of wasted waiting time and the “is it today” or “maybe it’ll be tomorrow” check/direct deposit dance we do? Before you read the rest of this article, take a moment to consider that it’s your money and your time. You’ve earned the right to be paid on time for your services, so becoming a martyr falling on the sword by not asking for it immediately upon services rendered is really your call—and the longer you wait, the longer it will take to get paid.
The following tips are designed to get you thinking about how to train yourself and your clients on invoice payment best practices, so you don’t have to do the aforementioned “waiting to get paid” dance with finance departments unless you want to.
Tip 1: Secure a signed proposal and/or purchase order
This may seem like a no-brainer but it isn’t. Without written authorization commissioning the project you leave yourself open to incurring unanticipated costs and not getting paid at all, much less according to the terms you outlined.
Trick: An executed contract protects you and your client
If the client does not provide a purchase order, then provide a brief contract or proposal that outlines the scope of the project, timing, location, project estimates, and other relevant information. Assume that the client will not pay on time and dictate terms of project engagement accordingly.
Tip 2: Get accurate billing and reimbursable expenses information upfront
Inquire before the project has started to get an understanding of how, when, where, and who is responsible for accounts payable, as well as what receipts are required and which expenses are reimbursable. Don’t wait until the project is complete to submit, only to find out that the expensive dinner the whole marketing team attended will not be reimbursed in full.
Trick: Avoid getting stiffed for non-reimbursables
Clearly outline reimbursable expenses and include what the client is responsible for in the proposal regardless of what the marketing or research team may request on site. This can help you avoid getting stiffed with unanticipated large bills (for example, a large facility recruiting or catering bill, the estimated cost of which was not pre-authorized).
Tip 3: Review all relevant documents
Before starting the project, review your proposal, the client-issued purchase order (if available), and the advance invoice. The person who commissioned the research is rarely the same person in the finance department issuing payment. Ensure that your paperwork is accurate, has the relevant details mirroring the client’s purchase order, the company’s name, address, tax ID number, and payment information, is easy to read and understand, and is addressed to the right individual and/or department. Note any changes in scope in the same formatting and language used in the purchase order. Not having the accurate, matching information can lead to extensive processing delays and late payments.
Trick: Mirroring matters
Mirroring helps those in accounts payable responsible for processing the invoice quickly code and categorize services for payment. You’d be surprised how many times your invoice may not match exactly what is stated on the purchase order.
Tip 4: Verify payment terms
The client’s payment terms may not be in sync with your own. For many large firms, terms are net 120 days regardless of the terms stated on your invoice. If you want to do business with such firms, you probably have to play by their rules, but that shouldn’t stop you from asking if there are exceptions for smaller vendors, incentives for timely completion, or for coming in below budget. Some companies tie on-time payment to getting a five to ten percent discount or rebate from the supplier. Such a discount can and does act as an incentive for early and on-time payment. Adding interest charges similar to a revolving credit card is another way to incentivize faster payments. Another tip is to use terms such “payment due upon receipt” to bring the invoice to the front of the accounts payable line.
Trick: Incentives go a long way
Offering rebates, incentives and/or accrued interest charges, or the old nugget of backdating to the start date of the project, are all proven ways to incentivize the client to pay early. Don’t forget to build in these costs early at the proposal stage to be most effective.
Tip 5: Invoice early, if not often
Don’t wait to submit your invoice until after the project is completed. Waiting only delays the length of time for your invoice to be processed and paid. The balance due invoice should be submitted at the same time as the topline or final report, whichever makes the most sense. While everyone’s experience is different, the idea here is to create a customized, consistent process that works for you. If the invoice has not been paid within the outlined terms, do not hesitate to follow up immediately with the client and/or finance department responsible for paying to confirm receipt and processing.
Trick: Work smarter, not harder
Online software also allows for efficient electronic payments. If you are not already aware, a variety of both free and paid online bookkeeping software such as QuickBooks, Square, Xero, ZipBooks, Wave, CloudBooks, and Bookly are easy to use and program in advance so invoices and late notices go out automatically. Select what works best for your business. Offer and encourage clients to use an electronic payment option which can facilitate faster invoice payments.
Tip 6: Schedule a monthly invoice review
It pays to schedule a monthly invoice review not only to determine what is outstanding, but to ensure that they are on track to be processed and paid. It’s simple due diligence and will pay off in the long run with improved cash flow.
Trick: Go automatic, facilitate faster payment
It’s important to remove any and all blockages from the payment process. Encourage clients to go paperless and do direct deposits. Set up automatic billing or installment payments. They are easier to track, facilitate faster invoice payment, create less waste, and help you avoid those uncomfortable late payment phone calls.
Tip 7: Don’t blow up relationship bridges
Try not to burn bridges with harsh communications and unwise decisions. Invoice payment is a business transaction, not an emotional one, even though you may be experiencing high levels of frustration, annoyance, anger, rage, and powerlessness that you have not been paid for services rendered in a timely fashion. Whatever actions you decide to take to secure “the bag,” as Cardi B would say in today’s lingo, consider that your decisions create the perception of how you, your brand, and/or your firm conduct business. Being perceived as unpleasant or difficult to deal with may lead to having a harder time getting referrals and ultimately, more business.
Trick: Evaluate late-paying clients as you would food in your refrigerator
There’s no trick to this part. Ask yourself if this relationship has reached its expiration date. Your client relationship is probably still valuable even if the client is slow to pay, but consistently commissions large projects. Be thoughtful, concise, and civilized in your communication whether in person, electronically, or by phone or text. Don’t be afraid to pause work for non-payment.
On a final note, here’s a cautionary tale that many QRCs have probably experienced at some point. Years ago, a lucrative client owed my firm a considerable six-figure amount for a series of focus group projects over seven months. I hustled like crazy to make money in order to continue to take on other projects and make payroll. After months of non-payment I was, quite frankly, frantic and tired of following up. No money and no cash flow. What to do? I called a friend who is an attorney to resolve the non-payment issue. He warned that getting an attorney involved ratchets up the situation to a level that becomes hard to de-escalate. At the time I didn’t care. My business was drowning and needed that cash.
So, with an understanding of my desperation, the attorney got involved. The amount owed was over the limit for small claims court and my attorney went right to the top counsel in the comptroller’s office and lodged a complaint. All it took was that one call in the morning. By the afternoon, everything started to roll downhill because my client’s boss had been pulled on the carpet for the outstanding, unpaid invoices, resulting in a figurative business “black eye.”
After some machinations, were the invoices paid? Yes, but employing the attorney tactic changed the dynamic of the
client-supplier relationship. My firm was branded as the one that dropped the equivalent of a business bomb. Bringing in an attorney conveyed that this was how I do business, that I brought a gun to a knife fight and spared no quarter, never mind I had been waiting almost nine months to be paid. A liaison was then appointed to oversee all upcoming project execution, which meant I was now one more level removed from the decision makers and payment approvers. The moral of this story is not to drop business bombs or go in with guns blazing unless you are prepared to deal with the fallout and collateral damage of potentially reduced or no future business.
The tips and tricks expressed in this article work, but are by no means exhaustive. There are a lot more out there worth considering, such as collections agencies that may suit your operation better. I invite you to use the QRCA message board to share your own tips and tricks on invoice collections with Views readers. Hopefully the tips mentioned here will help you navigate doing business in a way that keeps you cash flush. I advise you to always seek the counsel of a good accountant and business attorney intermittently to ensure that all your business systems are set up to help you avoid challenges that inevitably come around as part and parcel of doing business.