If you ask a freelancer or a service provider, what is the biggest problem they face? Getting the payments on time will be the answer you will receive almost every time. So much so that most freelancers or service providers give up on their chase of clients who won’t pay. Eventually losing out on the money which they deserve for all their effort.
There is a dire need for solving this problem. At Refrens, we have tried our bit to solve this problem by introducing the Early Pay Discount option when you create an invoice for your gig. An Early Pay Discount is a win-win for both the service provider and client since it saves cost for the former and the latter receive the money on time.
Getting clients to pay their bills can be as difficult as pulling teeth. Many customers put off paying until the last minute. After the deadline has passed, you will need to issue repeated payment requests to others. Consider offering an early payment discount if your company is short on cash.
So, what exactly is an early payment discount? Is it going to assist or hinder your business if you offer it? Find out in the next sections.
What Is Early Pay Disocunt ?
An early payment discount, sometimes known as a cash discount, is issued to encourage clients to pay their bills earlier. Offering a cash discount may not be necessary if you don’t have a lot of late-paying clients, but if you do, it could be a suitable option.
Unlike rapid discounts, which are offered at the point of sale and usually require a cash transaction, an early payment discount is included in the terms that you and your customer have agreed to.
Early Pay Discount In Refrens
An early pay discount is a pre-decided reduction in the amount on the service provider’s (or freelancer’s) invoice which is applicable if the client pays before a set date and time. This date and time are also set by the supplier or freelancer. You can add an Early Pay Discount while creating invoices on Refrens.
Let’s look at the advantages for both of them in further detail:
Increases cash flow: For a service provider, they get the payment on time. They have more cash in hand to solve day to day financial needs or for that matter plan long term investments. Their working capital will increase due to smaller payment cycles.
Reduces risks of late payment or non-payment: Since this will reduce the cost for the client, most clients would like to opt for it. This reduces the effort of chasing down payments which could then be spent on more productive tasks. It is self explanatory that the risk of non-payments will decrease as well.
Better than other methods to get on time payment: There are alternative methods also like Factoring etc. But those are complex methods which involve 3rd Parties who govern the commission rate. With Early Pay Discounts, it is the service provider who decides how much he is ready to part with. It is much simpler since it is between the two transacting parties only. Effectively, the money on the table is shared between the two parties and not any third one.
Reduces Cost: For the client, it comes as cost saver with no extra effort being made. You just need to pay on time and you get the same service for a lesser cost. Simple!
Build relationships: Money can ruin any relationship they said. So why not pay early and keep a healthy relationship. An on time payment keeps the service provider motivated to deliver in future as well. After all, finding a good service provider who understands and delivers well is tough.
Benefits Of Early Pay Discounts
What Are The Drawbacks Of Getting An Early Discount ?
While granting an early payment discount can be advantageous in some situations, it also has significant drawbacks.
To summarize, Early Pay Discounts are beneficial for both parties. Do think of adding this in your next Invoice on Reference at the click of a button. And if you are not creating invoices through Refrens till now, this seems to be a good reason. Isn’t it?