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Stop Chasing Payments

5 simple ways to stop chasing customers for payments and get your time back!

The Strong One: Implement a strict followup process

I’m sorry but if you want to spend less time chasing customers down for overdue payments, you can’t skip this step.

First, spend some time deciding on an appropriate billing and payment policy for your company and your customers. The policy should not only state the payment schedule and due dates, but also what happens when a customer does not pay on time. Be sure to include things like how frequently you will follow up, what the consequences will be, and when and how the consequences of non-payment will escalate. You can change it at any time, but try to create something you know you will stick with for at least 90 days. Write it down.

man on computer

Did you write it down?

Next, schedule time on your calendar for you to see this through. Fifteen minutes once a week or once a month is usually enough, but choose what’s appropriate for you. This pairs really well with the upcoming section “Bill less often.”

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The Overlooked One: Bill on a schedule

bill on a schedule

Create all invoices at one sitting – either once a week or (if you can) once a month. Why does this work? Two reasons. First, you are not spending time and energy billing “randomly” or daily.  But also because now all these bills are due on the same day! Now you can send reminders of payments coming due soon and follow-up on a schedule – instead of what we all normally do which is just get to it whenever we have the time, feel up to the task, or are about to go broke.

Let’s say that you’re a local handyman business owner here in the Fredericksburg area. You’ve only got yourself and one other crew running, which probably means that you’re still stuck doing the admin work on the weekend. Every weekend. But what do you do when a bill is overdue? You’ve got to find time during the workday to call them and then hope they answer.

Let’s try the same scenario with a weekly version of our “Bill Less Often” plan. On any given day, you take payments and admin copies of invoices, and put them in a file folder. Then the first hour of every Tuesday is dedicated to billing. You open the folder and first go through all the checks and payments that came in, marking those invoices as paid. Next you go through and create any invoices for new work completed last week and send them out to the customers. Lastly, you pick up the phone and give a friendly call to any customers with an outstanding balance. (It really helps to have a script!)

Just a fair warning though – billing less often can backfire if you don’t put a good followup process in place, but more on that later in the article.

The Simplest One: Make it easy to pay online

Any website can accept online payments, and making it easy for your customers to pay online will save you time and hassle. It eliminates the excuses for them – they don’t even need to talk to you and they can pay you any time of day or night! There are many ways to do this, but here’s a quick and simple 5-step process any small business can use to get paid online and stop chasing customers for overdue payments!

snapping fingers easy

5 steps to collecting payments on your website

  1. Setup a free PayPal Business account.
  2. Create a PayPal button where the customer gets to specify the amount. If appropriate, have a field for them to enter an invoice number. Here’s a help article by PayPal.
  3. Add the PayPal button code to your website. Put it somewhere obvious, like at the very top, the very bottom, or on a special “Pay Now” page. Whatever page you choose to use, copy the address of that page – you’re going to need it for the next two steps.
  4. Add a “Pay Bill Online” link to your email signature. Link it to the “Pay Now” page on your website. This is the most important step.
  5. Add a “Pay Your Bill Online Now” link to your electronic proposals and invoices. Link it to the “Pay Now” page on your website.

Your customers will appreciate that you’ve made it super easy for them to pay you. You’ll get paid faster and more consistently, and spend less time chasing overdue payments. It’s a win-win!

1 Step to Collecting Payments on Your Website

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We’ll set up your PayPal button on your website for you, and even add it to your email signature. We make it easy!

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My Favorite One: Stop Billing Manually

There are a bunch of reasons why you should stop billing manually and start using online billing software, but for today I just want to focus on one key reason: Automatic Reminders.

How much time do you spend each day, week, or month following up with customers to collect credit card payments that bounced, checks that are “in the mail”, or worse, messages that are being completely ignored? Any half-decent online billing or bookkeeping system will change your world! The key is automatic reminders. I’ve got two easy examples of how this works is our own business…

Avoid Regular Payments That Don’t Get Paid

Some of our invoices are generated manually as needed, but many of our services are ongoing and so payments are processed automatically each month. In the bookkeeping system we use, this is called a “Recurring Invoice”. Each month the system automatically generates an invoice, charges the card, and emails the Client a receipt. So far, so good.

But what happens if there’s a problem with the card? That’s where a key feature of the software, called “Dunning”, comes into play. The system automatically retries the card 2 days later. Often, this fixes the problem before I even knew it existed! I also love the fact that this happens without even bothering the Client about it too. No stress for me, or for them, and no stress for our relationship either.

success gesture

Leverage Automatic Reminders

Now, if the card doesn’t work the second time the system keeps retrying the card every few days and the Automatic Reminders come in. On our system, automatic reminders are templated emails that go out a set number of days after the invoice is overdue. They let the Client know the invoice is overdue, provide them options to pay (like call the office or pay online), and gently, but clearly, state what the process is for handling payments that continue to go unpaid.

Here are three great billing systems to consider:

  • Quickbooks Online: The most well-known option. Incredibly powerful and competitively featured.
  • Zoho Books: The one we use here because we use Zoho’s entire integrated suite of online business tools. We love it for its simplicity and flexibility.
  • FreshBooks: A rising star in the small business bookkeeping software world. Definitely deserves a look.

Most online billing software can be configured in less than an hour. You can do that tonight. Like right now. Stop reading, click on one of the links above, stay up an extra hour (or skip an hour of TV tonight), and get this done. You’ll thank me tomorrow, I promise you.

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Key Steps When Setting Up Your Billing Software

First, choose a program that makes sense to you right now. Don’t spend more than 15 minutes deciding which one to use. You can use the time you save after implementing this system to find “the optimal one” next year.

When setting up your chosen software, here’s a checklist to follow:

  1. 15 mins: Follow the program’s setup process, but don’t be afraid to skip steps that can wait a week. Put in your company name and carefully type your billing address, but skip things like “add your fax number” and if your logo is not handy (which makes me cringe, but okay) then skip that too.
  2. 5 mins: Create a fake customer profile for yourself. Use your middle name and your personal email address, or whatever. Then test the system by sending yourself a bill or invoice for a dollar. 
  3. 5 mins: Modify the email template. Review what you received and update it so it looks professional and represents you well. Don’t spend more than 5 minutes on this today.
  4. 15 mins: Configure the reminders:Here is the real magic. Make sure the system is configured to send email reminders at appropriate intervals.
  5. 5 mins: Review the reminder emails. Make sure the wording and formatting are good enough for now.
checklist

Step “Six”: Next, block one hour on your calendar for tomorrow to review these settings again in more detail. This will be your opportunity to double-check the reminder text and frequency again, as well as make any adjustments. If you’re already booked for a 12-hour workday tomorrow, then block the next available hour you have. Don’t let this opportunity get away before it’s too late and you get distracted by the next thing.

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The Obvious One: Require a Down Payment

Requiring a down payment can really ease the pain of having outstanding payments out there, and in some businesses, can eliminate it entirely. How much of a down payment you require is up to you, but here are some common ways to do it:

  • $100 or 10-20% of the estimated total – With a small down payment like this, you’re just making sure that the customer is serious enough to put some “skin in the game”.
  • 20% or more of the estimated total – Enough to cover all or most of your expenses on the project, such as materials and labor. This usually won’t cover all or any of you business overhead, marketing costs, or your profit, but it’s enough that if the rest of the payment is delayed, at least you can afford to get to work on the next project.

Combine this method with an online bookkeeping system (as mentioned above) and you’ll virtually eliminate time wasted chasing payments. Here’s how: when a customer makes their down payment, require them to also provide a credit card or ACH authorization. Write it into your standard contract template that they are authorizing you to use those methods to collect payment on the day any future invoices become due. Note that the suggestion is to automatically collect on the day they become DUE, not the day they are ISSUED, which leaves your customer the option to pay with other methods if they pay early! Of course, be sure to consult your attorney on the exact wording.

money exchanging hands

Bonus Method #6: Require Complete Payment Up Front

I didn’t want to count this one because it’s similar to requiring a down payment, but it really works quite differently. Not to oversimplify it, but what’s better – shutting down your business because you’re broke, or losing a handful of customers because they weren’t willing to pre-pay? You don’t have to be extreme with this. For example, consider implementing a business policy that states all services require pre-payment in full before service will commence unless otherwise stated in writing. Have your attorney review it, and then add it to all of your proposals and invoices.

A Paying Customer Is a Happy Customer

Over the years we’ve implemented all of these methods here at Websites For Anything. The time these methods have saved us has allowed us the opportunity to focus on bigger and better things – like helping you solve this problem too!

Combine all of these methods and you’re sure to cut the time you waste chasing payments to almost zero.

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