How to make sure you get paid on time every time
Running an IT business is simple, right? You agree a fee for your work with a prospect. You do the work to the clients satisfaction. They pay you in a timely fashion.
For IT Solution Providers and Managed Service Providers (MSPs) the world over, getting paid by clients on time can be one of the biggest on-going challenges they face.
But it doesn’t need to be.
Here are some tips for ensuring you get paid on time, every time.
Before you agree to do any work with a new client, run a credit check on them. There are a number of low-cost and, in some cases, free services that allow you to check a business to see whether they are a good credit risk, and whether they have a recorded history of late payments or defaulting on payments.
If a business shows up as a credit risk during a check, don’t be afraid to ask for payment up front –especially if this is a client that you’ve not worked with before. If the client refuses to pay up front, alarm bells should start ringing.
It takes a lot of courage to walk away from work with a client, but this stings a lot less than doing the work and then not being paid for it.
Get paid up front
You went into business to provide IT services, not be a bank, right?
That being the case, it surprises me how many MSPs still offer large credit terms to clients.
In the case of Managed Service agreements, payment 30 days in advance is a regular practice undertaken by some of the most progressive MSPs worldwide. If a client doesn’t make the payment at the start of the month, they don’t receive service for the month.
Likewise, if you’re delivering a project for a client – insist on a deposit and ask for payments for any hardware to be made up front. It’s bad enough losing out for your own time when a client doesn’t pay, but if you’ve paid for hardware on their behalf too, that’s a seriously concerning issue that will keep you up at night.
Ensuring that an invoice doesn’t get sent to a client and then sit on a desk somewhere awaiting payment is an important step towards easing payment issues.
In the UK, many businesses use Direct Debit to make sure that payments are taken automatically on a regular schedule for recurring services like Managed Services. Direct Debit isn’t just a service for big business – small businesses can cost effectively employ it too. Here’s more advice on using Direct Debit to simplify Managed Service billing.
In other countries, automated clearing and standing orders exist. Investigate to find out how you can implement such services to minimise your billing challenges.
Make a friend of your client's finance department
Above everything else, ask who is responsible for processing your payments at a client and make a friend of them!
Introduce yourself, and regularly stay in touch with that person.
Ask them for advice on the best way to get paid on-time. That person might have a payment routine that, once you become aware of, you can work within to ensure timely payments.
A little human contact can go a long way to resolving any late payment challenges.
Dealing with late payments
If you are being paid late, then implement a robust process for chasing payments.
This might include:-
- phoning or emailing your client finance contact to ensure an invoice has been received and confirming a due date for payment to ensure no invoices are “lost”
- phoning or emailing your client finance contact just before the due date of the invoice to make sure there’s nothing preventing payment being made
- chasing overdue invoices the moment they are late, and not being afraid to make a nuisance of yourself.
Have the process in place *before* payments go overdue. It takes the emotion out of the difficult situation of actually asking for money.
Employ a receivables Bulldog
Many companies struggle with chasing invoices because on one hand they want to be the client's friend, delivering good service and being an ally, but on the other hand they hate having to be the bad guy and ask for money. The answer? Employ somebody who isn’t worried about being seen as the bad guy, and let them chase overdue invoices.
One MSP client of mine employs a formidable lady to chase client payments. That lady is not involved in any aspect of service delivery at all, she’s there just to make sure the MSP is paid on time. When clients with overdue invoices complain to the MSP boss about the lady being a bully or a nuisance chasing overdue invoices – the MSP boss confides in the client that yes, he knows, and he’s scared of her too..
Dealing with overdue invoices might be an uncomfortable subject, but it shouldn’t be.
Provided you agree terms up front, you have no reason not to expect payment on time. Remember, you’re an IT company, not a bank!