Few business challenges are more frustrating than clients who are slow to pay invoices. It’s difficult enough to find that client and convince them to hire us in the first place, not to mention producing and executing the assignment to perfection, all the while keeping the client happy and meeting their ever-changing needs. But in the end when the shots are great, the client’s ecstatic, the invoice is sent and you’re basking in the glow of another creative triumph, what more could you ask for? Well, for starters, you'd probably ask for a client who pays their bill in a reasonable amount of time.

If You're Going To Be The Bank, Act Like The Bank

All too often, even the happiest clients have no qualms about waiting to pay an invoice until 45, 60 or even 90 days have passed. Worse still, it seems like the bigger the company the longer they wait. For example, Alpha Universe spoke with a studio in the Midwest that bills about $500,000 annually and started shooting for one of the largest marketers in the country some years ago. “They hired us regularly, were very happy with our work and sent job after job our way. But they also implemented a corporate policy that meant I was lucky to be paid in summer for a shoot completed in the spring. Our studio—a small, family owned business with just a few employees—was subsidizing a $50-billion global powerhouse.”

Regrettably, this isn’t uncommon in the photography business. 

“When clients don't pay on time,” says Jennifer Martin, owner of Zest Business Consulting, "the photographer is basically becoming the bank. Offering a client terms—the opportunity to pay later—is like making a mini or short term loan to the customer. I consider terms to be a luxury option, extended to qualified, responsible, and financially reliable companies. They should have to apply for this option and not every business will qualify. This is standard in business."

It’s an unfortunate reality that securing payment up front is often impossible for commercial photographers dealing with hurried clients. Some companies even leverage the knowledge that photographers want to work for them and set their own egregious payment terms. After all, what’s a photographer going to do, pass on the work? Not likely.

Martin suggests appealing to those companies’ desire to save a buck whenever possible. “Although larger organizations don’t run on the same schedule,” she says, “they all want to be as profitable as possible, and paying less for services can be an opportunity to do this. I suggest offering your regular pricing for pay upon receipt and offering an increased rate for terms."

Incentivize To Break Out Of The Net 30 Trap

The studio Alpha Universe spoke with has always stated a “Net 30” policy (meaning payment is due in 30 days) on their invoices, but over time that had degenerated significantly. “At our studio the ‘slow-paying customers’ trend continued until 30 days became the best case scenario. It peaked last year when we found ourselves lamenting to a client who had come into the studio for a new headshot who happened to be a banker, that our customers sure seem to be paying a lot slower than they used to. ‘Do you penalize them if they don’t?’ she asked. ‘No, we just assume they’ll pay when the invoice is due.’ She smiled: ‘Well there’s your problem.’ ”

It turns out clients prioritize invoices that incentivize them to. That incentive might be a discount for early pay, or a penalty for paying late. Each state has different guidelines for charging interest on late payments (almost all of them allow for some form of late fee or interest charge). The Midwest studio we spoke with now has invoices that read, "Balances due after 30 days are subject to a 1.5% per month interest charge.” A potential penalty motivates slow payers—but only if they know about it.

Martin says an even better approach is to offer a discount for quick pay rather than a penalty for slow pay. "Rather than thinking of a late payment as a penalty,” says Martin, “consider offering an incentive for cash or check payments upon receipt. Always turn the early payment with the friendlier rate into a positive: an “opportunity,” “reward,” “bonus” or “incentive.” People love to feel like they are getting a deal, or winning something rather than being penalized. This holds true even when they are working for a HUGE company paying the bills.” 

Incentivizing early payment wasn’t the only change made at the studio in the Midwest. “’Net 30’” became ‘Net 15.’ Our thinking was that if clients see that a bill is due in 30 days and they pay in 45, perhaps if we shortened the timeframe to 15 days we could actually get paid in a month—which still seems like a perfectly reasonable time to me. Sure enough, more and more clients are paying within 30 days now, and some, in fact, are paying within 15. We’ve gotten zero complaints and we’ve never actually had to charge the penalty. Better still, our clients are happy and now we’re getting paid in a much more reasonable amount of time. That’s great for cash flow which, as every small business owner knows, is king.” 

Jennifer Martin is a business owner, author and business coach, as well as the founder of Zest Business Consulting in Ojai, CA.