One of the most valuable things we offer the FreshBooks community is our unique report card service. Your report card shows how you stack up against comparable businesses in your industry in a variety of metrics. You can see where you’re outperforming your FreshBooks brethren (and sistren!), and where you might be able to “up your game,” as the kids say.
Unlike lesser traditions like Talk Like a Pirate Day or Festivus, Report Card Day comes four times a year! We just recently sent out third quarter report cards for 2007, and as we’ve done in the past, we interviewed several top performers to find out the secrets to their success.
This quarter, our focus is on those who collected on their invoices the fastest. How are they getting their clients to pay them so quickly? We asked, and they were only too happy to share.
Establish a strong relationship
For our interviewees, success starts long before the first invoice is sent. “A really good personal relationship with our customers always helps us get paid faster,” says John Lasiter of Qfolio.
Artur Bobinski of XHTML iT agrees. “Great and friendly service always helps with getting paid faster,” he says.
Here at FreshBooks we’ve long noticed the same thing; establishing a good, respectful relationship with our users means we receive that same respect right back. We help them bring home the bacon, and in return they always make sure we’re taken care of. Care for your customers and they’ll care right back.
Keen, Clear and Under Control
It’s also very important to be up-front with your terms and straight with your customers. From the initial contract right through to the final invoice, communication is key; make sure there are no surprises for your customer.
“My clients know when their bills will be sent, their terms of payment, and the consequences of late payments,” explains Heather Villa of IAC Professionals. She provides high-quality work with a rapid turnaround, “and they return the favour with their payments,” she says.
There’s widespread agreement on this point. “If your invoices are unclear, it leads to unnecessary communication,” says Artur. According to him, presenting all of the necessary information clearly on your invoices “is one of the best methods to get paid faster.”
You can take this approach even further, like Hannah Barnard of Web Depiction. “I speak with the client and lead them through the estimate, step by step,” she says. She suggests sending the invoice only once the client feels all their questions have been answered. As she explains, “clients are always anxious to get started once they know they’ll be taken care of.”
Work on Your Timing
According to Tim Hamilton of Astonish Designs, Hannah’s last point is a great one; timing can be used to your advantage throughout the life of a project. “We break most projects into three invoices,” he says. The first invoice comes at the beginning of the project, the second following the acceptance of website mock-ups, and the third and final invoice is sent just prior to launch. “These are the times clients are most excited about their project, and are therefore motivated to pay quickly and move things forward,” he says.
John says speed is important, too. Once the project is completed, “the invoice is included at the end of the project in one smooth motion.” If you wait even one day, John says, “it will often take longer to receive payment.” So get those invoices out fast!
Use FreshBooks to Your Unique Advantage
With a web application like FreshBooks, you have a whole host of special abilities to speed up collections, abilities you wouldn’t have otherwise.
For instance, Marc Lee Pack of SOHO Consultants likes to generate invoices on-site for his clients when a job is complete. As he tells it, “sometimes they even pay me on the way out.”
The online nature of the application is helpful, too: “my clients love the value-added ability to receive e-mail invoices and view their account statements online,” he raves.
Auto-Billing: Get Paid Instantly, Over and Over Again
Automatic recurring billing is one of those killer features that gets the money in the door, too. What better way to ensure rapid payment than automatically charging your customers? According to one FreshBooks user, “automatic billing makes sure we get paid quickly, so we can sit back and relax.”
We heard plenty of similar stories. Don Steinberger of Blue Diamond Webs has been in the business for 15 years, and he’s glad services like FreshBooks have “opened up avenues” to automate the billing cycle. As he puts it, “it keeps me out of the collection business.”
Tim is similarly grateful. In tandem with his one-time projects, he focuses on “building relationships with clients that include monthly services,” and charges their credit cards on a recurring basis. “This brings our ‘time to pay’ closer to zero,” and that’s a good thing.
Move to Value-Based Billing
The final piece of advice we heard is arguably the most valuable. It’s also a subject dear to our hearts; Mike, our CEO, even gave a seminar on this topic for the Design Guild of Toronto last week.
Forget about billable hours. Start billing what you’re worth.
Don explains he had the idea by looking at web hosting companies; he wondered if his web design clients would pay their maintenance fees in a similar fashion. “So I came up with a contract formula that works equitably for myself and my clients,” he says. Rather than billing clients a different amount each month, clients sign a maintenance agreement with a set monthly fee.
“The goal was to get out of the billing and collection cycle,” Don explains. “It has worked wonders for my business.” He says his production time has doubled—”because I’m not sitting and calculating monthly statements, sending them out, and collecting by old-fashioned methods.”
The relationship is so predictable, customers think of it “more like their cable TV bill.” They keep the money set aside, and it’s automatically charged each month. “It has truly eliminated the monthly collection effort,” says Don. “It’s my attempt to change the way people look at website maintenance.”
Don’s experience might change the way you look at your industry, too.
Thank you to our contributors: Many thanks to Daniel for conducting these interviews. On behalf of the community, we’d like to thank Artur, Don, Hannah, Heather, John, Marc, Tim and others for taking the time to share your experiences. We really appreciate it, and keep up the great work!