You can't run and grow a business if you don't get paid.
We've been hearing a number of stories from business owners struggling to get paid for their work. That can be a frequent struggle among service businesses—but it's possible to beat it, and we'll talk about how.
But there's something even worse we've heard lately from some other folks we're talking to—the customers of service businesses, who've been telling us something that stopped us dead in our tracks and made it clear we need to address this right away. These customers of service businesses are telling us they aren't even being asked for payment.
Yes, asking for money can be awkward
We get it. We've all been there. Everyone who's ever started a business can tell you about the early days when they were first getting their feet wet, and how weird it feels to do work for someone and, when it's done, ask them to give you money. It's always awkward when you start out. But you, the business owner, can't let that awkwardness take over, or you're going to have serious trouble.
If you don't ask for payment, you're letting your business fail.
If you aren't immediately asking for payment, you aren't running a business—you're running a charity. Your customers hire you to get a job done, and they expect to pay. It is generally a very rare occurrence that a customer tries to get work done without paying, and there are ways to handle that. However, for the most part, your customers understand you have a business to run, and you don't provide service for free. So, there's really no reason for you to allow feeling awkward about asking for payment to stand in the way of getting paid because your customers already know they need to pay you.
Invoices get you paid
You should not consider any job done until you've asked to be paid. And one of the easiest ways to ask to be paid is to provide your customers with an invoice. Invoices are great for both your customer's and your financial records. More importantly:
Invoices make your business look more professional than if you were to just ask your customer to pay you in cash. The more professional your business is, the more likely you are to get paid, and quickly.
When you provide your customer an invoice, you immediately create an understanding that you are a business that provided a service, and the customer is obligated to pay for that service. You also put payment terms and amount in writing. This helps protect you against payment disputes that are much more difficult to protect against otherwise. Your payment terms can be as simple as due on receipt, or you could provide your customers with a brief grace period to send you payment. The invoice also gives your customer and you a clear record of what was done on the job, what materials were paid for, and what the total cost of labor is. The more details you provide, the better and more professional your invoice is. Of course, you don't want to go overboard and detail out every minor thing, unless it's actually necessary to account for it in the customer's total cost.
So, how do you take your business to the next level, and establish a professional invoice practice to make getting paid easier than ever?
1. Collect customer contact info
We can't stress enough how important it is to have good customer contact information. This includes:
Physical address: This can be used for mailing invoices, as well as following up with your customers for getting paid, future work, and more.
Phone number: You can't check in or follow up with your customers with other methods as directly as you can with a phone call.
Email address: Nothing is easier or quicker for sending invoices, following up with your customers, or securing future work opportunities than email.
2. Create a detailed invoice
Let's go over a few important dos and don'ts for creating invoices:
DO NOT: Write your invoices by hand. Nothing screams a lack of professionalism than a hand-written invoice. Sure, you can do it that way, but it opens you up to problems. You have to be very careful to ensure your handwriting is legible, so your customers can actually read it. Providing your invoices in a typed, printable format ensures your customer can read and understand the invoice, and cannot claim they were unable to read your handwriting.
DO: Separate materials and labor as line items. Professional invoices for services should, whenever possible, detail materials and labor separately as line items. This allows your customers to see what they're being charged for, as well as reviewing invoice items for any mistakes. For you, the business owner, this is very important for being able to report on your income, expenses, and general business health.
DO NOT: Ignore taxes. Ignoring taxes is dangerous to both your business and you. If you don't properly keep up with your taxes, you can leave yourself open to audits, penalties, and other business-endangering events. Depending on your state and the services you provide, you could be required to keep track of sales and use tax, as well as regularly report and pay these taxes. You should be sure to add taxes to line items that require them so they show up on your invoices.
DO: Add notes when needed. It can be as simple as a few words to provide extra information, or a more detailed explanation of services provided. Adding notes to your invoices ensures both you and your customers are clear on what you've done.
3. Deliver the invoice to your customer
This is obviously the most important step to getting paid. There are two best ways you can handle getting your invoices into customer hands:
In-person: This is certainly one of the easiest methods if you don't mind the follow-up work. The best plan here is to prepare the invoice before showing up to complete the job, print it out to take along with you, and simply hand it to your customer when you're done with the job.
Email: This is an excellent method of providing invoices, as you can be sure they'll make it to your customers, and they won't get lost. All you need to do is prepare the invoice, and send it to your customer's email address. And since most people check their email more often than they check their mailboxes, your customers are more likely to see your invoice right away.
4. Follow-up until you're paid
The hardest part of making sure you get paid is following up with customers until the invoice is settled. If you don't collect payment as soon as service is complete (when you may hand your customer the invoice in person), an easy method for handling this is as follows:
A. Use email until the invoice is past due. If you've emailed the invoice to your customer, you should follow up by email about a week before the invoice is going to be past due. You should send an additional reminder on the day the invoice is going to become past due. If another week passes without being paid, it's time to move on to Step B.
B. Call the customer when the invoice is past due. If you've provided the customer the invoice, and allowed for a grace period to settle the invoice, you want to wait until about a week after the invoice becomes past due. We recommend one final email reminder at this time, but after that, you should make it a point to call your customer every week until they pay the invoice. This is why it's so important to collect your customer's phone number at all times.
How WorkWeek helps get you paid
At WorkWeek, we work hard to make sure your service business gets paid. We follow all of these tips to help you create clean, professional-looking invoices.
We make it easy for you to send your invoices to your customers by email. We even handle the annoying task of following up with your customers automatically, on your behalf, reminding them there's an invoice that needs to be settled. We also let you know when you have invoices that are past due so you can follow up when needed. And because we prompt you to collect all of your customer's contact information, we make it pretty easy to call them by always having their phone number at your fingertips.
If you'd like to take your business to the next level, we invite you to take a look at WorkWeek, and get started for FREE today.