5 Tricks for Private Investigators to Handle Late-Paying Clients
Eagle can be categorized as a small business. Although we have other offices and own private investigation agencies in other states, we’re not that big. Compared to say, Microsoft.
So for us, and the roughly 30,700,000 (3.7 million) other small businesses in the United States, cash flow is critical to survival. In Georgia alone, there are over 1,400 people who hold the title of private investigator. They all need to get paid.
Thus, clients who don’t pay their invoices in a timely manner can become an incredibly frustrating challenge for any private investigator. Not getting the money you’re owed is probably money you need to pay your own bills. Chasing down clients to get paid can also become a real time drain when you could be working on a case or spending much needed time with your family.
A study conducted in 2017 found that small business owners spend an average of 1.3 days per month trying to collect money that’s owed to them. That makes chasing payments very expensive for a private investigator.
Now, Eagle has wonderful clients. There are some that pay within days of getting an invoice (thank you!) and there are some that need a gentle prod every now and again.
We’ve come up with 5 ways to keep calm and still collect the money we’re owed. These may be helpful to anyone with outstanding invoices:
1. Remember it’s YOUR money
Nobody enjoys asking for the money they’re owed. That’s why many private investigators struggle with late-paying clients. After all, when looking to pursue your passion and dreams, hounding people for money probably wasn’t on the top of the list of things you imagined doing.
But here’s the rub: Asking clients to pay up is part of your business. And one of the most important steps to getting clients to pay you what you’re owed is adjusting your state of mind.
Always keep at the top of your mind: You should never feel bad asking for money you’re owed. You worked hard for it and you deserve it. They should be feeling bad for being tardy with their payment, not you.
If you have provided excellent service to a client, it’s no longer their money. It’s your money. Remember that, it’s YOUR money.
When you think about it like this you should never have any bad feelings asking for what you are rightfully owed. Assuming of course, you did exemplary work as a private investigator.
2. Outline Clear Payment Deadlines
One way of tackling late-paying clients is to establish hard payment deadlines in a contract that clients will sign before you start work as a private investigator.
30, 60 or 90-day deadlines are very common, but you don’t have to adopt them just because other private investigators do. Determine what deadline you want based on what your own agency cash flow needs are.
Would a 60-day deadline risk throwing off your own monthly obligations — such as rent or agency insurance? If so, then you should request a 30-day deadline instead.
In some cases a 14 day deadline might work better for you. Base your timeline on your business needs. Then make it set in stone by having your client sign a contract.
In the unfortunate situation where a private investigator has to employ a collection agency or proceed with legal action, a written contract becomes vital.
If you have a situation as a private investigator where a client refuses to comply with your payment deadline this may be a sign of trouble down the road for the private investigator.
If the client is a client you really would like to have on your roster as a private investigator then feel free to negotiate a little. Just make sure whatever you agree on suits your business needs, and is set in stone with a new signed contract.
3. Think About Early Payment Incentives and Late Payment Penalties
Using your contract, there are ways you can encourage faster payment and actually discourage late payments.
Firstly, consider offering a financial incentive for quick and early payment. If a contract’s payment deadline is 60 days, offer a small discount (up to 5%) for those who pay within 30 days.
You may be resistant to giving up that margin. But think about it like this: The cash flow peace of mind you gain is worth more than the worry of a late payment. AND you won’t have to spend the time chasing that payment, which isn’t a good use of a private investigator’s time.
You can also add a late payment clause to your contract. You should talk to a lawyer to decide on the percentage and timing. You definitely don’t want to go overboard on the penalty.
People don’t like to be penalized. You want the penalty as something your client wants to avoid rather than being something you now have to follow up and chase as a private investigator.
4. Create an Invoicing System and Follow-Up
If you’re constantly following up with clients to get paid, as a private investigator this becomes a time consuming chore. It’s not like you don’t have enough moving pieces as a busy private investigator.
There are online services you should consider like FreshBooks, QuickBooks, or Xero that can automate invoicing and follow-up process for you.
Most of these online programs not only send invoices for you, but they also can be programmed to send out reminder emails on late payments.This is how they are designed which frees you from the task of remembering to follow up. This extra time is time you can use to focus on more immediate tasks as a private investigator.
Some of these systems also allow the client to pay the invoice online, saving you even more time.
5. Don’t lose your cool
Considering how dependent your private investigation business is on cash flow, you might get angry or upset when a client doesn’t make paying you a priority. Even though they’re likely negatively impacting your business as a private investigator, you should never get angry with your client.
It might be a simple slip of the mind situation. It might be a simple mistake. You’ve made your own mistakes as a private investigator, right?? We all have. Bear that in mind before you lose your cool. A simple friendly nudge might do the trick.
The following excerpt from a Xero study shows that more than one-third of customers pay at least two weeks late. That’s just the way it is.
So if you lose your cool every time your invoice is paid late, you may lose clients that are very important to your private investigation business.
It’s also fair to say that most clients are not bad clients. After all, you chose to do business with them in the first place so they must have had something to offer.
You should try to maintain a friendly relationship even with late-paying clients. Don’t send nasty messages. Instead, send friendly and personalized ones.
There are any number of reasons why your client pays late.
Maybe their accounting department lost a few people and things are overloaded. Maybe there was a death at the company and everyone is just a little off beat.
If you maintain a friendly posture, the camaraderie and goodwill you generate can benefit you greatly as a private investigator once the problems go away and your client becomes reliable again with their payments. Your understanding will be appreciated, and your business relationship will be strengthened.
Do you have any tips to share regarding late paying clients? How do you as a private investigator deal with this? We’d love to hear your opinions!