How to Collect Payment from Customers: Step-by-Step Guide
Maintaining positive cash flow is critical for being a successful small business owner. Getting the right system in place to collect payments from your customers is a key piece of the puzzle.
If you’re having trouble collecting overdue payments, check out our tips for dealing with customers who won’t pay.
In this article, we’ll go through collecting payment from customers and the best practices to get paid on time and in full.
A payment processor is the “middleman” between the service provider and financial institution that makes debit and credit card transactions safe, secure, and valid. Stripe, Moneris, and Elavon are all examples of common payment processors.
When choosing a payment processor, carefully review the plans they offer and how well they work with your existing accounts. All good processors will work with most major credit cards like Visa, Mastercard, and merican Express.
Some payment processors will allow you to accept funds through Apple or Google Pay, issue refunds, collect deposits, and provide extra support in the event of a payment dispute.
Costs for payment processors vary depending on the processor and the plan you choose. Most charge a base interest rate on each invoice and an additional fee per transaction. For example, you’ll see rates written as “2.5% + 30¢.”
Jobber Payments is a popular option for home services businesses because of its ability to sync with QuickBooks Online. This can help you keep your home service business organized by sending invoices and receiving payments in the same place you manage clients and jobs
Selecting the right payment processor can help you:
- Receive payments quickly and efficiently
- Offer different payment options to clients (cash, check, credit card, etc.)
- Improve your accounting and financial record-keeping—making it easier for you during tax season
- Collect payment in installments using consumer financing
Your payment terms set the expectation for your clients on when and how they are supposed to pay.
To define your payment terms, answer the following:
- When are payments due (on the day the invoice is received, or within 14 days)?
- Will clients be charged late fees for unpaid invoices (how much will they be charged)?
- Which payment methods does your home service company accept (Visa, Mastercard, AMEX, cash, paper check, debit cards, or ACH payments)?
When it comes to creating payment terms for your business, the more clear you are, the easier it will be to receive payment from your clients. Make sure to include these terms on every invoice so your clients aren’t left in the dark.
READ MORE: How to deal with unpaid invoices
When it comes to collecting late payments, you’ll be ready to accept payments in many different ways as long as you have a payment processor in place.
Here are a few of the most popular ways to collect payments:
Save credit cards on file and charge them automatically
Use your payment processor to save the credit card information securely, and charge the client automatically after the service is complete.
Before you save a client’s credit card information and charge them automatically, always ask for permission. Make sure the client is aware of how and when you will bill their card. You can include this information on their invoice or in an email.
Use a card reader or app to collect payment on site
In most cases, you’ll need an up-to-date mobile device and a small piece of hardware that plugs into your phone, known as a card reader.
Provide the customer with a payment link
Payment links make it easy to collect money from clients in one click. It allows your clients to pay when it’s convenient for them, 24/7 using a self-service portal. The easier it is for clients to pay, the faster they will.
You can attach payment links to text messages, invoices, websites, and emails. To send payment links to your clients, you’ll first need to set up online payments with your payment processor.
1. Send invoices to your customers right away
If you can’t invoice on the spot, make sure to send your invoice within 48 hours of finishing the job. Your customer is much more likely to pay when your impressive service is still top of mind.
Not to mention, the longer you wait to send an invoice, the longer you’ll wait to get paid for your services.
READ MORE: How to write an invoice in 7 easy steps
2. Offer customers a variety of payment options
Accepting a variety of payment methods—including credit cards, checks, bank transfers, and cash—allows your customers to pay in a way that’s most convenient for them.
You can also consider creating a payment schedule to let your customers pay for your services in installments.
3. Make your expectations clear
Setting expectations from the initial contact with your clients can help make sure you are paid for your services in a timely manner. This is why we recommend having a conversation with your customer before you even begin the service.
When it comes time to collect, reiterate those expectations by including payment information such as terms, methods, due date, and late fees right on your invoices.
4. Ask for deposits or payments upfront
Asking for deposits or prepayments is a great way to make sure you are paid for your work.
Many service businesses charge a 25% to 50% deposit to cover any upfront material costs. To request a deposit from your customer, mention it‘ll be required in your initial conversation, then add it as a requirement on your quote.
Pro Tip: Use Jobber to add a required deposit on your quotes with just a few clicks.
While new customers may be hesitant to prepay for your services, asking existing customers for early payments can help improve your cash flow.
You can also offer an incentive, such as a small discount, to encourage customers to pay upfront for the job.
5. Send polite invoice follow-ups
Just because an invoice is past due doesn’t mean your client is intentionally trying to avoid you. It’s possible they simply forgot, the invoice was filtered into their spam folder, they are away on vacation, or they’re even dealing with an emergency.
In order to keep a good working relationship with your client, send a polite follow-up email one week after payment was due. Reattach the invoice to the email and remind them of the payment methods you accept.
Jobber’s automated invoice follow-ups make it easy to send a customized email or text payment reminder to customers.
6. Give them a call
If your email reminders or text messages aren’t getting a response from your client and they won’t pay their invoice, it’s time to pick up the phone.
Keep a non-accusatory tone and remind your client about the work you completed and the balance owed.
Initiating a conversation gives your client an opportunity to bring up anything that’s holding them back from making a payment, like dissatisfaction with the job or financial issues.
7. Get a collection agency involved
If a customer is unwilling to pay for your services and is unresponsive to your follow-ups, you may need to take legal action.
Hiring a debt collector may help you get back what you’re owed, but it comes at a price. Before you hire a collection agency, make sure to ask them the following questions:
- How much will your services cost?
- What methods do you use to collect a debt?
- What is your agency’s success rate?
Answering the above questions will help you determine if the owed amount is worth sending to collections and make sure you maintain a positive reputation.
Collect payments hassle-free with Jobber
Let Jobber help your small home service business improve the cash flow to your bank account.
Whether you prefer to get paid in person or online, Jobber takes the hassle out of payments with convenient, touchless options for your customers—with no hidden fees.
And with a full range of features available, from online booking to scheduling and dispatching, it’s easy to manage payments in the same place you manage your work.
This post was originally published in July 2017. It was last updated on December 15th, 2021.