‘Getting Paid’ Remains a Key Issue for Busines
Ask a room full of business owners if they enjoy dealing with the money side of their businesses and you’ll be met with a room full of people shaking their heads no.So many talented and ambitious clients have set up strong business, slick operations, a robust team however, when we look at the bottom line it is often “getting paid” strategy is hanging them out to dry.
Dealing with the money isn’t fun, but it’s a necessary evil for staying in business. Without money coming in, you won’t be in business for long.
Simple, Short, Sweet and to the Point Payment Terms
The cornerstone of collecting money on time is making sure invoices go out promptly and accurately. Before you start the work, make sure you have a written agreement on its scope and costs, and the procedure for getting paid.
Your payment terms should be kept simple, short, sweet and to the point.
The problem of “getting paid” is not limited to small companies, large companies are too are faced with this problem. Whilst they have clear payment terms in place and often even expensive factoring and insurance companies it is still a challenging part of the business.
For many have varying their payment policies is a strategy to secure a sale however at what price. Since the recession, many of the “industry norms” went out the window with stricter payment schedules have changed and for many payment cycles are limited or on cash on delivery basis.
It is best to avoid the feast or famine roller coaster ensuring promptness is key not only in sending out invoices. I always recommend to learn early your customers’ payment practices, too. If they pay only once a month, for instance, make sure your invoice gets to them in plenty of time to hit that payment cycle.
What if payment still is not made after an initial phone call? Don’t let things slide. Statistics show that the longer a debt goes unpaid, the more difficult it will be to collect and the greater chance that it will remain unpaid forever. I recommend making additional phone calls rather than sending a series of past-due notices or collection letters. If several phone calls fail to generate any response, a personal visit may be in order.
If the customer refuses to meet with you to discuss the issue or won’t commit to a payment plan, you may be facing a bad debt situation and need to take further action. There are three options: small business court or employing a debt collection agency. Your solicitor can advise you on what is best to do.
Set Clear Penalties for Overdue Invoices
Use penalty clauses if you don’t think your clients will respond to a reward for paying you early, perhaps you’ll find it more beneficial to implement penalties for late payment instead. For example, you could introduce a flat fee that activates the moment your payment deadline passes and which you add to their next invoice reminder. And be flexible: if your client has a genuine reason for paying late it’s better to come to an agreement with them rather than just piling on extra charges
Knowing When to Walk Away
At a certain point, whether you’re dealing with a disorganised consumer or a small business under financial stress, there is no quick tip or magic trick perfect enough to get you paid on time. So when your other options have failed, you have to know when to cut the cord with a chronically late paying client.
Don’t continue doing work for a client that isn’t paying up. Instead, provide two week’s notice before pausing services, then if you don’t receive payment within another two weeks, it’s likely time to let that client go.
Payers have a variety of reasons for not making payments on time. Whether because of financial issues, priority level, or plain disorganisation, the steps you take to make paying invoices easier on your clients can truly make the difference in preserving your own business’s bottom line.
Are These Your challenges?
You know your company best. What I’m wondering is, do you need to get better in one of these areas? Let me know. I’d be happy to help. After all, it’s what I do.
BA (Hons),Dip MLBC, PECI, ICF, NLPP
Business Consultant & Coach
Infinite People Solutions