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How to agree on a customer payment schedule

Any tradesperson knows just how frustrating it can be to receive delayed payments for their work. That’s why it can be very beneficial to agree on a payment schedule with your client to avoid money mishaps. Here are our top tips on how to do this professionally.

Why is it important to set up a payment schedule?

It goes without saying that being paid for the work you do is a big part of running your business. That’s why we recommend you agree on a payment schedule with your customers as soon as possible.

Doing so will keep everyone aligned and make sure all involved understand their responsibilities.

However, talking about money isn’t something many people like to do. So, formalising the process during the contract stage limits awkward conversations later on. Read on to learn the best way to approach this with new and old clients alike.

How to suggest a payment plan to a client?

As a general rule of thumb, you want to get into a good habit of making payment plans immediately. This will save you many headaches down the line and ensure that you get paid for your good work.

Therefore, you need to lay out your price, expected payment terms, and delivery expectations upfront. Not only is this good business sense, but it also demonstrates a level of professionalism to your customers.

So, when interacting with new customers and providing a quote, be sure to include all this information. That way, you can then negotiate with your customer before signing to ensure the schedule satisfies both parties.

How to agree a payment schedule upfront

When agreeing to a payment plan with your customer, it’s important to remain transparent about its terms and conditions. That’s why we recommend taking all of the following steps during the process:

  1. Explain the total cost of your services and the proposed length of time the payment plan will run
  2. Outline the payment schedule, including the due date for each work milestone and the expected payments
  3. Discuss any interest or fees that may be associated with the plan, including how you calculate those costs
  4. Provide information on how your customer can make the proposed payments, such as online, over the phone, or in person
  5. Emphasise the benefits of the plan, such as the ability to make payments over time rather than all at once
  6. Encourage your customers to ask any questions they have and let you know if they need any help with the process

Throughout all of this, it’s very important that you remain patient and understanding while your customer assesses the schedule. After all, they won’t want to work with a tradesperson who won’t meet them on level ground.

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The benefits of agreeing to a staged payment plan

While providing a singular figure upfront can provide customers with an idea of costs, it’s not always helpful. That’s what makes a written payment schedule so useful.

It shows your customers their project milestones, and it protects you from requests outside of the agreed terms.

Think about offering staged payments as a way to manage the financial aspects of the project. This will create a more manageable flow of funds, which helps to build trust between you and your customer.

What to consider when offering a payment plan

Now that you know the reasons for offering a payment plan, it’s time to look at the creation process. Below are our top tips to follow when offering a payment plan to ensure that both parties are satisfied:

  • Break down the project: when breaking the schedule down, be sure to identify key milestones and deliverables. This will break the project into stages and clearly outline the work to be completed at each step alongside its payment
  • Communicate clearly: clearly outline the payment schedule, including the due date and the amount you expect, for each milestone. Your customer will then understand what to expect, how much to pay, and when, which avoids confusion or misunderstandings as you progress on a project
  • Be flexible and transparent: throughout the process, be willing to work with the customer to agree on a payment schedule that’s mutually beneficial. This may include allowing the customer to make a larger payment at the end of the project or offering a payment plan with smaller, more manageable instalments. Alongside this, be upfront about any interests and fees to limit any potential disagreements.
  • Maintain your records: even once you’ve signed the plan, it’s essential to keep good records of payments including the date of pay, the amount, and the method. Doing so allows you to track and easily reference the payments for auditing or conflict resolution purposes.

Image of an invoice example - how to agree a payment schedule

How to make sure customers keep to the agreed payment schedule

At some point. it’s likely you’ll encounter a customer who pays late or asks for more time to pay you. This might be due to cash flow issues or a general disregard for your payment agreement.

In these cases, it pays to maintain a delicate balance between good customer relationships and your right to get paid.

Here are a few tips you can follow to help you manage this sort of tricky situation:

  • Offer payment motivators: a common way to ensure regular payment, payment motivators, such as only commencing work after payment is provided, are a good way to encourage customers to stick to your agreed schedule. You could also explore discounts and reduced future prices. Just remember to clearly define these
  • Outline late payment fees: no matter what, you should always make it clear that late payments are unacceptable from the start. Outline the costs of penalty fees, how they’ll be applied, and when. This reminder should then be added to any and all invoices as a form of record-keeping
  • Listen to non-payment reasons: sometimes late payments will be inevitable, so if your customer is proactive about informing you of this, take the time to listen. This will help diffuse any tension and make payment renegotiation easier
  • Adjust your payment schedule: if required, you should always be willing to adjust your payment schedule if required. This can help relieve customer stress and ensure you still get paid
  • Consider due date compromises: if your client asks to extend their payment due date from 30 to 60 days, see if you can compromise. For example, 45 days instead. Also, ask if that length of time makes it easier for them to pay in the future. If so, have the contract changed so you don’t lose a customer and your cash flow isn’t disrupted.

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Get more financial help with Checkatrade

With that covered, you should now find it much easier to create an agreed payment schedule with your clients. Of course, if you’re looking for ways to save money on your business, then you should join Checkatrade.

As a Checkatrade member, you’ll get access to plenty of member benefits and discounts. Not only that, but we can help market your business and give you a place for customers to leave reviews.

Get in touch today to learn more about the whole sign-up process. And don’t forget to visit our blog as well for similar articles. We have pieces on invoicing when self-employed and bookkeeping tips.

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