How to collect payment from customers while maintaining positive relationships
The typical small business is currently waiting to receive thousands in unpaid invoices — some estimates indicate an average of $84,000 per company. At the same time, more than half of freelancers say they have to wait too long to successfully collect payments from customers.
If you’re in business long enough, some non-payments may be inevitable. But the good news is there are plenty of steps small business owners, freelancers, service providers and entrepreneurs can take to receive timely payments and maintain positive customer relationships. Here’s how.
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Steps for collecting payments from customers
Having customers is critical to starting a business. And having paying customers is vital to staying in business.
Here are seven steps to collect payments from your customers and keep your business going strong.
Steps to take before beginning work
- Communicate your payment terms upfront. Specify your fees, payment options and when you expect to be paid.
- Request partial payments before providing goods or services, depending on what makes sense for your small business. You might request a percentage upfront. Or, you might set up installments, such as an initial fee before kicking off the project, a second installment paid when you begin work and a final payment due when the job is done.
Steps to take upon completing your work
- Send your clients an invoice ASAP, once you’ve delivered the goods or services or as soon as you’ve hit a payment milestone.
Steps to take when customer payments are late
- Follow up with customers to check in on the status of overdue payments, whether over a phone call, email or an SMS message.
- Send an invoice reminder with late fees added to account for any delays.
- Speak with a lawyer to discuss your options if you can’t get the customer to pay or respond to your outreach.
- Search for a collection agency with positive reviews and a strong reputation if you have late payments over 90 days past due.
Best payment methods to make paying easier for customers
If you want to make things easier for your customers, start by making sure your payment solution accepts the most popular types of payment methods. According to the latest data from Statista, the most widely used payment methods are:
- Credit cards
- Debit cards
- E-wallets and digital/mobile wallets, such as Apple Pay or Google Pay
TIP: The best way to make sure you’re offering suitable payment methods for your small business clients? Ask for customer feedback to see if your clients prefer other payment methods beyond those you currently accept. Expanding the types of payments you take is one simple but effective way to improve your customers’ experience.
What to look for in a payment processor
Are you an entrepreneur, small business owner, service provider or freelancer searching for a payment solution? Here are some critical factors to consider when evaluating your options.
To streamline the payment process, look for a platform that has built-in invoicing features for sending invoices to collect:
- Partial payments over time
- Timely payments on the invoice due date
- Late payments with late fees
Look for systems that offer features designed to protect you and your clients from potential harm.
- Fraud detection capabilities are essential for flagging and preventing suspicious activity. These may be particularly important for small business owners and entrepreneurs who manage high transaction volumes.
- Protect sensitive information with encryption features. Processing payments involves sensitive and confidential client payment information. Find a payment solution that offers security features to keep customer details safe.
Various payment methods and payment options
As discussed above, the best payment methods are those that your customers want to use. That’s why you’ll want to select a tool that accepts a wide range of payment methods, including the most popular ones:
- Credit cards
- Debit cards
- Digital wallets like Apple Pay and Google Pay
Beyond that, you may also want to move forward with a payment processor that enables you to give customers a choice to break larger payments into partial payments that can be paid in installments over time. The ability to add late fees for overdue payments is an additional feature offering flexibility.
To streamline the bookkeeping process on your end, you’ll be well advised to find a system that plays well with other tools you use, such as your website platform, accounting software or point of sales (POS) solution.
2. User experience and customer experience
You deserve a solution that small business owners and entrepreneurs like you actually enjoy using. Evaluate multiple payment processing platforms.
- Find out what new customers and loyal customers say in their online customer reviews.
- Evaluate the user experience and customer experience yourself by exploring the company’s website, connecting with the customer support team via live chat and getting a first-hand demo of the product.
As a small business owner, local service provider or freelancer, keeping your expenses in check is crucial to long-term success. The cost will likely be a top factor when weighing your options.
While some platforms offer a flat monthly rate, others charge extra for additional features. Still, others charge a fee per transaction, taking a percent of the payments collected. Get these costs figured out upfront and understand which works best for your budget.
Best communication methods when following up on a payment
The top channels to use when sending follow-up payment reminders for past due invoices are the ones your small business already uses to keep in touch with customers, such as:
- Phone calls
- Text messages and SMS marketing
- Email campaigns
What to do when payments are late
Are you struggling with cash flow problems? Unsure what to do with customers who keep making late payments? Here are some steps entrepreneurs, small business owners, service providers, and freelancers alike can take to successfully follow up on unpaid invoices, collect payments and take legal action.
- Streamline your follow-up process using payment reminder templates and a payment solution that will automatically send notifications when invoices are overdue.
- Consider charging clients late fees for overdue unpaid invoices.
- Consult with a lawyer to see if taking legal action, such as taking a client to a small claims court over a non-payment, makes sense.
- Find a reputable collection agency to work with if a client has late payments that are more than 90 days past due.
- Ask for partial payment upfront for future clients to minimize your chances of non-payment.
Things to remember and things to avoid when requesting payment
Make the payment collection process as smooth as possible by following these DOs and DON’Ts.
DOs for requesting customer payments
- DO: Remember to evaluate clients before deciding whether to do business with them.
- DO: Ask for partial payments to avoid non-payment.
- DO: Discuss your payment terms and late fees upfront to clarify expectations with customers.
- DO: Use professional payment reminders to automatically inform customers of invoice due dates ahead of time and give them a nudge on the day they’re due and past due.
DON’Ts for requesting customer payments
- DON’T: Be vague about when the invoice is due. Clearly state the due date or spell out your payment terms (such as within 30 days).
- DON’T: Forget to send invoices ASAP. Don’t let your own bookkeeping delays prevent you from getting paid on time.
- DON’t: Make it hard for your customers to pay you. Offer a range of payment methods to improve the customer experience and minimize non-payments.
How Broadly Can Make Receiving Online Payments Easier
Broadly offers convenient payment processing software for small business owners. Our customer payments platform, Payments, makes it simple to create and send online payment reminders to ensure timely payments from new customers and existing ones.
Take advantage of Broadly’s Payments top benefits:
- Professional templates help collect payments via email and SMS, send payment reminders on the invoice due date and follow up on overdue payments.
- Flexible payment methods are available, including Apple Pay payments, Google Pay payments, credit card payments, debit card payments, check, cash, etc.
- Customer-friendly payment options include partial payments over time.
- Automated customer review requests can be sent via email and SMS in real-time after invoice payments are received to generate more reviews for your local business.
- Integrations with accounting software, such as Quickbooks Online, streamline processes and reduces errors.
See what Broadly can do for your business in just 30 days