The first entrepreneurs appeared 20,000 years ago when human trade took place in New Guinea around 17,000 BC. From Fortune 500 companies to brick-and-mortar stores, companies still face late-paying clients. Digital marketing agencies are no exception. Here’s how you can tackle it without losing clients.
Remove friction from the payment process and automate it as much as possible
If your client has to walk into a bank each time and make a deposit. Chances are you will get payments late. If they have to log in to their bank’s website and authorize wire transfers each time – they will face a delay. A client could be busy, on vacation, or have an emergency. You will have to keep following up – sending notices, emails, and phone calls (which take up a lot of time and energy).
As long as the payment process is reliant on your client having to make an effort, it is going to affect how quickly you collect your dues.
Here’s how to fix it:
When you on-board a new client, sign a contract with them for a recurring subscription. You can use Stripe, Authorize.net, or any other payment processor to set up a recurring subscription. This will allow your clients to be charged automatically each month without them having to lift a finger.
If the payment still doesn’t go through due to an NSF (insufficient funds) then you can email your client and follow up on payment. But for a big majority of your clients, this obstacle will go away.
There is a catch though. You will be charged around a 3% fee on each payment. But given the time and effort spent chasing those payments, 3% seems like a low cost to pay. Unless you have a full-blown billing team working on collections.
Another option is to factor the payment processing fees in your contract to be borne by the client. Hence you don’t have to cover the processing fees.
2. While removing friction is great it’s not an all-in-one solution
The age-old solution to resolving this problem is providing results and quality service to your clients. If your clients do not see progress on the work they will be naturally hesitant to pay for service and will demand details of all work done up to that point for them to be charged.
A quick fix for this? Speeding up your onboarding process. Remember the time you landed your first client? Your onboarding process was probably wrapped up on the day the contract was signed.
As agencies grow and their work volumes increase on-boarding is often left lagging. Solution: Dedicate someone on your team to handle onboarding as soon as possible.
And lastly, if your clients see consistent results on their account each month, they won’t have any reason to delay payment. Most often, I see clients asking agency owners to hop on a call before making a payment. A key reason for this is the lack of results. The better the results and customer service you provide the easier it’ll be to collect your paycheck.
3. Set clear boundaries with your clients
These are tricky waters to navigate. Some firms impose a late payment fee of a small percentage to discourage late payments. Some firms have a stop of service beyond the due date. You can factor these in your contracts when your client signs up so they know in advance and there are no disagreements.
4. Underrated Advice
Most agency owners don’t have the time to draft contracts, the time taken by back and forth on terms and conditions. Always always sign up for a contract. I can assure you, it will save you a lot of time and effort down the line. Most of the strategies we have discussed above are only enforceable if you have a contract in writing. Use drafts and online signing services to automate the process.
5. Incentivize your clients to pay early
Instead of spending time and energy chasing clients for payments. You can spend a fraction of the time giving them a “cookie”. What I mean by a cookie is a small complimentary service or insight to them that will make them happy. Happier clients are less likely to delay payments. While this seems like a bit of an extra work, you will save a lot of time and energy chasing them for payment. So while the above strategies will not always work for every client, they can work for a big majority of your clients. I have experienced this firsthand as CFO and advisor to many agencies over the years. The final solution is to have an accounting team in place for BI Consultancy Services that will ensure you get paid on time and you are succeeding financially while growing. We can set up a free consultation to discuss your needs in detail and see if we’re the right fit to work together.
