Unpaid invoices add up quickly, and can destroy a small firm that counts on that cash to keep their doors open and their lights on. As a small business owner, you can outsource the collection of unpaid invoices to a law firm that specializes in debt collection or you can sell the debt, but both of those options are pricey, meaning that you will lose a sizeable portion of the unpaid bill while trying to recoup the loss. Rather than letting matters escalate to that point, firms can attempt to sidestep the unpaid invoice by perfecting their billing process.
Clear Payment Arrangements
The American Bar Association has outlined several steps for lawyers who want to avoid unpaid invoices, but the first and most important step is to communicate the payment arrangement before you start working with the client. Never rely on a verbal arrangement, as they can easily be ignored and are seldom legally enforceable, and ensure that your price reflects fair market value–that will also help you avoid hiccups down the road.
Do Your Due Diligence
Unfortunately, regardless of how clear you are about your terms and expectations, some clients will do anything to avoid paying an invoice, and others will gleefully take your services, while never intending to pay for anything. Before letting anyone use your services without paying in advance, check them out and ensure that they are good for the money. Without a bit of due diligence, you may be left holding an empty bag.
Detailed and Accurate Invoices
Make sure that the invoices that you create are perfect, detailed, and professional looking. If possible, use invoicing software to create detailed invoices and track whether or not each one has been paid. The more details you include on the invoice, the more likely your clients will be to understand why your services garnered that particular price tag.
Clients who understand why you have had to charge them a certain price are more likely to see their bills as fair and are thus more likely to pay them in a timely fashion. If you have provided the client with some free tasks, list those on the invoice as well. This helps them understand your value, and it makes them feel like they are getting a deal.
Avoid letting the bill get too high, unless you are certain that the client can handle a big bill. Instead, give them incremental bills along the way. That way, if you do get ignored, you won’t lose as much money or have sacrificed as much effort. By using a digital communication management tool, you can send your clients alerts as you complete certain tasks and give them a heads up about upcoming invoices.
Be Direct About Late Payments
Unfortunately, you will face a late invoice or two, regardless of how perfectly your invoicing process is streamlined. When this happens, be direct about your expectations. Many clients erroneously assume that a lawyer can handle a late or even a missed payment, and it’s up to you to dispel this belief. Give them a clear request as well as a clear set of repercussions regarding late payments. Finally, if you can’t afford to deal with late payments, don’t continue to serve that client.