Know your worth, and pay yourself accordingly.
Why do we find asking to get paid so difficult?
It may be a necessity service, or you may have performed some duties over and above the norm. Whatever you do, it’s likely that at some point in your business journey (and very likely this will be within the first five years of running your business), that you will face a struggle/ dilemma with the fees that you charge your customers.
I see this on a regular basis, and I have been through it myself at one time or another: you find yourself not getting paid as much as you should be. This can happen for a variety of reasons, but most commonly, you’ll be:
Not charging enough
Not invoicing soon enough
Not charging at all!
Not asking to be paid when it’s overdue
But why would this happen? More often than not, it’s simply fear. Fear of being rejected, and because it’s just so awkward to ask for money. No matter how good we are at our job, when it comes to asking for payment, most of us would rather the client just do it without us having to interact.
Here’s the challenging bits.
You’re not charging enough.
This either happens through pricing too low to begin with, or by giving out discounts a bit too generously. Don’t get me wrong: there is a place for this, perhaps as a means to recognise high value or your most loyal customers, when you are trying to break into a new market or to win a new client. But it can be very hard to take this away once you have started this habit. A lot of the time you will price it up correctly, but then find yourself simply getting nervous and dropping the price - all without receiving even a single complaint!
Discounting can lead to capacity issues. You will need to fit more into a shorter time frame, and by doing that, you’re not doing yourself, nor your customers any favours if you cannot fit the work in. If you sell products, it means you need to find more sales, or customers, somewhere else. This could ultimately lead to cash flow issues due to your reduced profit margins.
You’re not charging soon enough.
It’s easy to put off invoicing. It’s another task, and a lot of people fear the look of invoicing immediately, thinking it will be preferable if they waited 24 hours or even a week to send their invoice.
Have you ever been in the position where someone took so long to invoice you, you’d forgotten about it by the time you receive the invoice (and you have likely allocated the money to something else by then?)? Or just as annoyingly, someone sends you their invoice and it’s already overdue? I would not recommend doing either.
A customer who is satisfied with the work and the feeling still fresh of the efforts you have gone to, will be more likely to pay than later down the track when the feeling is diluted.
You’re not charging at all.
You heard right, that’s giving time away your time and expertise! In the service industry in particular, and including plumber, electricians and other trades, it’s easy to give our time away. It may seem easier to just quickly do something rather than have the awkward conversation with the customer about the extra work, or the fact that it’s going to cost them more. The reason for doing this is either that you are too busy, your team isn’t in the right habit of communicating the extra work, or the thought of upsetting the customer puts it in the too hard basket.
You’re not asking to be paid when it’s overdue.
It’s just an awkward conversation really, no one wants to be remembered as the pushy debt collector. You want to be remembered for your great work. So, we leave it and check our bank accounts three times a day just hoping it will appear, so we don’t have to deal with it. But: I’m not sorry to tell you, you do have to deal with it.
There are bigger things at play when these issues don’t get addressed. Believe it or not, most people want to be invoiced promptly so they can deal with it and move on. Your bank balance will be healthier and so will you, thanks to your reduced stress levels.
If you are stressed about money, chances are the rest of your life and family will be impacted by this too. Then there’s your team. Your employees like to see a job finished to completion and that you are proud enough to confidently charge the customer what you quoted for the work. They also like to get paid and not worry about whether they will be out of a job because of the bank balance.
Here are some of my top tips to help you get paid:
Quote or estimate the fee where possible so it’s not a surprise. That way you know they accepted the fee before you undertook the work, so you shouldn’t feel nervous about what you charge.
Work with someone external to the business to help you work out what the cause of the fear is and how to overcome it. This is not necessarily a quick fix so be patient and keep focusing on improvements.
Use a system like Xero to help you streamline your invoicing and debt management. There are many add-on apps to help this process go smoothly depending on the complexities of your business and industry.
Find out what everyone else is doing in your industry, but don’t be afraid to be different. These days it’s common for small businesses to have terms of 7 days. There are always exceptions to this, such as working for large organisations like city councils, of course, who may have fixed payment monthly dates. Still, you could consider different terms for different client types.
Make it easy for people to pay you. Invoicing online and adding payment services such as Stripe and PayPal may incentivise tech savvy people to pay their invoices quickly (and possibly even reap some credit card rewards). If it’s hard to pay you, people will put it off.
Ensure that you have your terms and conditions outlined up front, including whether you charge interest on late payment or not. You may want to discuss this with your lawyer.
Offer options for payment, particularly for necessary services, just in case people don’t have all the money at once. Maybe they pay more, but they can pay it in instalments over a period of time.
If you have the luxury of an administrator who does this, encourage them to do all of this systematically, so you can just focus on nurturing the relationship you have with your customer.
Know what’s included in your quote and what’s not, and keep track of where your time is going so you know how much “free stuff” you are truly giving out. You might be surprised.
If you would like to work on “asking to get paid”, come and talk to us about our programs to see what we can help you with.
Lisa-Jean Foote
December 2020