We’ve all been there. You put in plenty of hours in good faith to perform legal services for a client, you send the bill, and when it comes due…crickets.
Late payments have become so common, in fact, that most of us just think of it as a fact of life. Need proof? Consider the following:
- Twenty-five percent of Americans regularly don’t pay their bills on time, according to NerdWallet.
- In 2014, according to Forbes, more than one-third of Americans had at least one bill in collections.
- Fundbox reports that 64 percent of small businesses are affected by late payments.
Of course, these statistics account for all different types of late payments, but they still suggest a disturbing pattern: Roughly one-quarter to one-third of us are paying bills late, but nearly two-thirds of small businesses—the ones who probably need payment the most—are paying the greater price for these delinquencies.
However, despite what these numbers tell us, you shouldn’t live by the assumption that your clients will pay late. As a professional performing dutiful services for your clients, you have the right to expect your clients to pay you—in full and on time.
Why You Shouldn’t Enable Late Payment or Nonpayment
Cash flow is the life-blood of any business, but for small but growing firms, any disruption of cash flow can cause serious problems. Here’s why you need firm boundaries with your clients when it comes to payment.
- People push boundaries by nature. If you allow a client to pay late once without penalty, he’s more likely to pay late again next month, and later still the next. Setting a clear boundary helps reduce or eliminate this issue.
- When they’re late—you’re late. Disrupted cash flow can affect your ability to pay your vendors—people with whom you’re building a rapport. Late-paying clients can make you look bad to the people you need to pay.
- Restricts your ability to grow. Business growth depends on your ability to plan financially. If you can’t count on timely payments, you can’t plan.
- Hurts your credibility with clients. In most cases, clients count on you to be a hard-ass when necessary while representing their interests. If you allow clients to take unfair advantage of your generosity, what message are you sending them? In the long run, you may actually damage your clients’ trust in your ability to stand up for them.
All that said, there are ways to ensure timely payment while maintaining your professionalism and without being confrontational, and we’ll soon discuss some strategies for doing so. For now, know that by setting fair expectations early in the relationship, then taking steps to solidify your payment process, you can effectively avoid becoming one of the 64 percent of businesses who struggle with late payments.