Getting Paid
Getting Paid for Small Businesses – this is perhaps the most important aspect for a small business owner. Cashflow is king and sets how you conduct all other aspects of your business. You must have cashflow to pay your own bills, so it is vital to make sure your clients are paying you in a timely manner, the full amount that you are owed.
Here are some tips to make sure your business is receiving the money it is owed.
A. Know your client/customer’s industry.
1. If their industry is down, then they might not be able to pay you as quickly .
2. What is the normal time for payment, some industries pay immediately, others take 60 – 90 days.
B. When picking up new clients/customers, try to run credit checks or background checks.
1. Maybe they are looking for a new supplier because they owe a great deal of money to their current one.
2. By knowing their history, you will have a better idea of future dealings.
C. If possible, always get a contract.
1. Simply submitting invoices as you go, may not be sufficient. Spell out details in a contract, including payment, when it will be done and how. Include remedies if they default or do not pay on time.
2. Having it in writing will help lay the ground work for a successful relationship and provide you with peace of mind that you have options, should they default.
3. Also include in a contract that you can collect court costs and attorney fees should you have to send any invoices to an attorney for collection. You may at least be able to collect some of the money it will require should you have to file suit.
D. If you do send out invoices, send them around the same time each month and be consistent.
1. You will need some accounting program or other billing software that generates invoices automatically (examples: Quickbooks or other industry specific software).
2. Your clients may need that extra reminder to pay on a regular basis.
3. You must make sure that you have a way to track what’s been paid and what invoices are still outstanding.
4. Make sure your invoices are correct – you don’t want to leave any money that you earned, but you don’t want to overcharge your client.
5. If you can send out immediate invoices on some work that you have performed, then do so. The sooner your client receives the work invoice upon completion of the work, the more recent it will be in their mind, and the faster you get paid.
6. Quickbooks and other programs now allow you to send your invoices electronically. You save on postage, your client gets the invoice almost instantaneously, and you get paid quicker.
E. If a client/customer is late, contact them.
1. Use any excuse to give them a call, this may be enough to “jog” their memory.
2. You can use the phone call as a way to make sure that everything is ok and that they are satisfied with your performance.
3. You can also use it as an opportunity to “up-sell” the client/customer or possibly find out if they need a new service/product from you.
4. If they are indeed having problems, see about working out a payment plan, be flexible, but firm as you want to be amenable and helpful, but not so much that the client/customer never pays.
5. Some personal face-to-face time may be necessary as well, so go see your clients if feasible. They need to understand that just because they are late paying you, you have bills to pay as well. Your banker is going to want its money for your mortgage on the first of the month as well.
6. Email is also good about “reminding” your client that a particular invoice has yet to be paid.
F. Send out delinquent notices on a regular basis.
1. Just as you need to send out your invoices on a monthly or continual basis, so do you need to send out delinquent notices.
2. Some clients/customers may have simply misplaced the bill, some just need that constant reminder, some, unfortunately won’t pay until a bill is 60 – 90 days due.
3. Send notices when an account is 30 days, 60 days and 90 days past due.
G. Consider an “adjustment”.
1. If it is a particularly good client that you would like to keep for future business, a discount or write-off may be appropriate to retain their business while they are going through a tougher time.
2. Maybe offer a small discount if they pay on time or early, say 2% off the total by paying within a 10 day period or some other amount of time.
3. Whatever discount you offer, make sure it is not so much that it cuts into your bottom line.
H. If all else fails, contact an attorney.
1. Unfortunately, some clients/customers simply will not respond until they get something from an attorney.
2. Of course, you will most likely lose some money, simply by hiring an attorney, you will have to agree to a contingency fee that usually runs about 25 – 33% of the amount collected on your behalf.
3. This takes time, 6 – 12 months or longer is not uncommon.
4. An attorney has much different resources at his/her disposal though, including filing a law suit, getting judgment, garnishing wages or bank accounts and filing liens against any property.
I. Base your monthly projections/budget on money received, not billed.
1. It is tempting to base your next month’s budget on the amount of money you billed out, but you must be conservative in these times, meaning you should base your next month’s budget on the amount you actually collected, not billed out.
J. What if your client/customer files Bankruptcy.
1. Stop any collection efforts you may be conducting on your own – this includes phone calls, letters or any action that may be deemed to be collection efforts.
2. You may still have some options.
a. If you have a perfected lien on the product or equipment, you should be able to get the property back or possibly work out an agreement whereby the customer keeps the equipment and you get some assurance of getting paid.
b. Filing a proof of claim with the Court will protect your interest should the Court liquidate assets of the client/customer.
3. If the services or product was a consumer item and you are not secured, then you will most likely have to write off the debt.
K. Communication, Communication, Communication.
In this world of instant information dissemination devices (email, Facebook, Twitter, instant messaging, text messaging) we sometimes forget that we still have to communicate with our clients. There may be a problem you are unaware of, or they may have simply forgotten about your invoice, or it may have gotten lost in the mail. No matter the reason, simply by staying in touch, you may be able to resolve late invoice quickly and efficiently. That helps everyone’s bottom line these days.
Hopefully these tips will put more money in your pocket!
If you are having problems with collecting money you are owed, please contact us at (502) 352-4950 to discuss how we can assist with your collectible accounts in Kentucky, Indiana, and Ohio.
