Do you run into cashflow problems because your digital marketing agency’s clients aren’t paying you on time? If you want to get paid faster, stop sending your invoices as “Due on Receipt”—it’s hurting your ability to collect quickly and consistently. Fortunately, there’s a better way!
Why “Due on Receipt” doesn’t work for agency invoicing
Why? Because your clients interpret “Due on Receipt” terms as “Pay this when you want to get around to it,” because there’s no specific future due date.
When it’s “Due on Receipt,” you’re at the mercy of the due date your client’s accounting person chooses… which probably is their usual A/P payment terms (e.g., Net 30 or Net 45). “Due on Receipt” just accomplished the opposite of what you intended.
Most of my clients expect payment in 30 days. Huge clients like Mars are paying agencies as late as Net 120. Fortunately, you’re probably not doing work for them—leave those enormous clients to agencies like BBDO and Ogilvy.
The better way to get paid faster: Have an exact due date
In contrast, if you set terms to Net 15 and there’s an actual due date, your client’s accounting person is going to plug that due date that into the accounting software, and they’ll get a reminder to run the check to pay on time.
There’s one exception on due dates—initial deposits for new projects. Client can pay those initial deposit invoices any time—but you aren’t going to schedule kickoff or otherwise start working ’til that’s paid. You can set a deadline for those invoices, or leave them open-ended—it depends on how fast you think the new client will realistically pay.
Applying this at your digital marketing agency
Want to get paid faster? Your next step depends on what you’re doing now.
- Using “Due on Receipt” currently? Start setting specific due dates for current clients.
- If you already use set due dates and clients pay late, reach out about unpaid invoices sooner after the due date. The squeaky wheel gets the grease.
- To get new clients to pay you faster, put them on shorter terms (e.g., Net 15 or Net 20 instead of Net 30).
Whatever changes you make, I think you’ll be pleasantly surprised by the results!
Question: What payment terms are you using on your agency’s invoices? Click here to share your comment below.