As a tradie, the chances are that you send your clients invoices as soon as you finish up on your latest job. Whether you write them out by hand or you use accountancy software like QuickBooks to digitise invoicing, invoices represent a job well done and help communicate to clients the costs associated with your work. Unfortunately, they’re not always paid on time, or at all. Research shows that tradesmen are owed more than £30 billion in unpaid invoices.
Below, we ask whether traditional invoices are the best way to ensure you get paid on time.
Invoicing early is a good idea
One of the reasons why so many invoices go unpaid (or paid weeks or months overdue) is down to timing. If you’ve been working on a job on a Saturday and don’t issue an invoice until the following Friday, your customers will likely have other things on their mind, and your work won’t be at the top of their priority list any longer. Invoicing as soon as you’ve finished the job, or indeed even ahead of finishing up, gives clients more time to pay you on time.
When you’re putting together an invoice, you should outline the work you’ve carried out, as well as the prices of any parts, so that your customers have full clarity over the costs. It’s all too common for a client to complain that you’re charging them more than the initial estimate, so putting things down on paper reduces the chances of disputes and cuts waiting times.
Setting a due date can help reduce your wait
As well as itemising on your invoices, you should state clearly when the payment is due. Some tradespeople set strict payment terms of seven days or even the same working day, whereas others are more flexible and allow clients to pay within 14 or 30 days. There are no hard and fast rules, here, but the statistics prove that the sooner the payment is due, the more likely a customer is to pay on time. Give them too long, and they’ll likely forget about it!
On your invoice, be clear on what happens when a payment is late. You might chase them or add a late payment fee to their invoice. This removes any ambiguity and shows clients that you are serious about being paid on time. You can further ease the payment process by stating the payment methods you accept on the invoice; leave your phone number and bank details on the invoice so payments can be made and queries can be dealt with promptly.
Taking payment upfront for your work
Whether you’re an electrician or a plumber, asking your client for payment upfront is another way to eliminate late payments and increase your cash flow. Stage payments help to reduce risk, and a figure of between 20% and 40% is the industry standard. Let your clients know that you’ll be invoicing them for this amount before commencing work to cover expenses and the cost of parts and that the remaining percentage will be due on or before completion.
Make sure that you give your client a receipt for the percentage they paid in advance as well as the date they paid, clearly stating that more is due. Another benefit of taking payment before starting work is that you’ll have their payment details to hand, and you can be sure that they’re a genuine customer and aren’t going to mess you around once you get to work.
Accept that you might need to chase
Chasing unpaid invoices is an unfortunate reality for businesses of all shapes and sizes, and it’s important that you learn how to do so confidently and professionally. Remember that if you are working with businesses, you can legally charge interest on any overdue invoices, but if you’re dealing with consumers, you’ll need to take a more direct approach and nudge them to pay your invoices as soon as possible.
Chaser has some great overdue invoice email templates that you can use, but more often than not, a text message or phone call works best. Be friendly and firm, outline your payment terms, and ask them when they expect to be able to pay. Where possible, show compassion and be flexible, but don’t let customers walk all over you or give excuses.
If all else fails, you can threaten legal action against them.
There is another solution to consider
Invoicing may be the most common payment avenue for tradespeople, but at PongoPay, we want to change that. We know first-hand how frustrating it can be when you’re waiting for a customer to pay up, and how one late or unpaid invoice can wreak havoc to your cashflow.
PongoPay allows those in the construction sector to take payment for their work in advance, with the money being held in a virtual safe deposit box at the start of a job. You can generate contracts with clients, send invoices automatically, and request for the funds to be released at the end of the project. It gives your customers confidence that you’re a trusted, legitimate business, and you peace of mind that you won’t need to endlessly chase for your payments.
Click here to find out more about becoming a better, more professional tradesman with PongoPay, and check back soon for more tips and tricks on running a successful business.