How to make sure you get paid in tough times
We are navigating some tricky times right now. There's a lot of economic uncertainty about, as we know only too well. In these times we might find, for example, that we're having to offer more payment plans or longer payment plans than we would typically do, which means that we're taking on more risk of not being paid.
This is a hot topic at the moment with many coaches and I am getting a lot of questions about it. I know it's something that a lot of small business owners are really worrying about and it's keeping them up at night.
In this article, I will dive deep into a select list of key ways and practical things that you can do to improve the chances of you getting paid, because we want to make sure that your business survives and thrives and comes out the other side of this difficult period, even stronger than before.
The areas we're going to look at are:
- Why your written contract is the main difference between getting paid and not getting paid.
- Why your service description is the secret sauce for heading off hassle (including my secret recipe for writing a cast iron service description)
- Why including an interest clause in your client contract is a smart move (even if you never intend to use it)
- How to feel confident when dealing with a limited company
1. Why your written contract is the main difference between getting paid and not getting paid.
I sometimes get asked, what is the point of having a written contract in place?
Does it make any difference?
Surely, if someone isn't going to pay you, they're not going to pay you?
This isn’t my experience at all.
I've helped thousands of coaches get their essential legal protection in place, but I also advise them on an ongoing basis, so I know the sorts of situations that come up. And I know that in a situation where a client is starting to make noises about:
potentially wanting a refund; or
not continuing with a payment plan; or
not finishing a program,
having a written contract is one of the really key things that's going to help you get paid and rescue that relationship.
If you haven't got a written contract in place, or you've got something in place that isn't fit for purpose, then you really haven't got a leg to stand on. So yes, absolutely. It makes a difference. I see time and time again, that it's the difference between getting paid and not getting paid, and quite honestly, if you've got someone who is struggling financially and they've got a number of different businesses that they owe money to, then you can bet your bottom dollar it’s the business that’s got a decent written contract or terms and conditions in place that is going to be top of their list of priorities to pay.
2. Why your service description is the secret sauce for heading off hassle
Your service description is as important as your written contract in many instances. Whether it's a schedule that's attached to your contract, or it's a clear list of what you're providing set up on your sales page or your program description, it is absolutely key.
In 90% of cases it’s the main thing that my clients end up relying on when they get into a sticky situation.
This is the secret to writing a successful service description: when you're signing up a new client or putting together the sales page for a new offering, I want you to make sure that there's a really clear, ‘nuts and bolts’ description of exactly what you are doing.
You want to make sure that these follow the pattern of SMART goals - specific, measurable, concrete things. And what I want you to have in the back of your mind when you're creating this description is
“if a client of mine has a wobble at some point in the future, is there a list of things that I can go through and confirm factually that I have done those things?” I want you to put yourself in a position where you can literally go through a list and tick off all of those things, leaving no doubt about the fact you have fulfilled your obligations under the contract.
What this does is it takes the heat and the emotion out of these situations - saves you a whole heap of hassle. You can just calmly point to your service description and go through and explain that you've done all the things.
This will usually ensure that: you get paid; get rid of an unjustified refund request; and maybe even save a relationship with a client. So that time that you invest in putting together your service description is time that you will not regret: it’s time really well spent.
3. Why including an interest clause in your client contract is a smart move (even if you never intend to use it)
In most cases, I recommend you include an interest clause in your contract or terms and conditions, which states that if payment is late, then interest accrues on that payment.
I've noticed over the years that my clients often feel uncomfortable about having this type of clause. I get it because you're all such kind and caring soul-led businesses. BUT you need to make sure you have those boundaries in place to protect you and your business and prompt payment is a key layer of protection. Let me assure you, it is entirely normal and customary to have that kind of clause in a commercial agreement (as an aside, none of my male clients has ever felt uncomfortable about having this type of clause. True fact. Boundaries!). So don’t worry that your customer will be put off. THEY WON’T EVEN NOTICE.
This clause really helps to encourage people to hurry up and make payment if they are overdue. If you are able to refer to a late payment interest clause when you are sending an email or message chasing payment, in many instances this will be the difference between your client paying and not paying. It could well be the thing that really helps to convince people to pay or to pay you first over and above someone else. I can only think of a couple of instances in the last 25 years where I've known a client actually enforce that clause and claim interest, but it acts really well as a deterrent.
4. How to feel confident when dealing with a limited company
When you are dealing with a new limited company, consider adding in the director/shareholder themselves into your client contract as well as the limited company.
The reason for this is when a limited company signs up with you, then their liability stays within the limited company. So if the limited company goes bust or doesn't pay you and you want to take action against the limited company, then the only thing that you would be able to have recourse against is what is owned in the name of that limited company. These days, many companies (including my own) have very few assets because we operate online. Gone are the days when we would have big bits of equipment and machinery or manufacturing or premises. So actually there could be very little in the company for you to take action against. In that instance, having the director/ shareholder as a party to the agreement can really help you because it means that if anything happens with the limited company or the limited company doesn't have any assets, then you would potentially be able to take action against that person in their individual name. Even if you don’t intend to take that action, it can help to encourage payment and ensure the debt owed to your business takes precedence over other debts that the limited company has.
So there you have it: four things that you can do that will help to ensure you get paid during this tricky period that we're in right now - and beyond.
I hope you have found this article useful. If you have, please share it with other coaches.
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