For a small firm or a solo practitioner, late payments can put a practice in jeopardy, not to mention the stress and frustration that come along with it. Here are a few strategies to help alleviate late payments:
- Include payment terms in the engagement letter. A signed contract that details how much and when you’ll be paid protect you and your client. A binding contract also make it easier if legal action is required.
- Reward early payment. Some service providers offer a percentage discount, as an incentive to clients who pay with cash or check on the day they receive service. A small discount, such as 4 to 6 percent could motivate some clients.
- Collect a deposit before work commences. Often service providers from contractors to lawyers will request a deposit or retainer. These upfront payments offset out-of-pocket expenses for the service provider to begin the work.
- Invoice promptly. While it’s not a pleasant part of the job, generating invoices is how you get paid. With proper time tracking of all billable hours, invoicing becomes less of a scramble and it is easier to generate invoices on a regular, predictable basis.
- Invoice clearly. Avoid legal jargon whenever possible in invoices. Let clients know precisely how many days they have to pay invoice. Alert clients to the aforementioned incentive for early payment.
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