7 tips for getting paid (and even avoiding overdue accounts)
One of the hardest things about being a small business owner comes down to money. Not the money you spend to run your business, but money you are owed by a client. Chasing down unpaid invoices, sending friendly reminders (or maybe not so friendly depending on how much time has gone by), unanswered emails and voicemails. It’s often a struggle to get the money you are owed.
We put together some tips on how to organize and collect on those outstanding invoices. (And maybe avoid overdue payments in the first place.)
1. Start by getting organized.
Being organized and keeping accurate records are vital in running every aspect of your business, especially if you expect to get paid. There are many different software programs and apps that can help with bookkeeping, which can help you keep track of invoices and payments. These tools can also generate accounts receivable reports specifying which invoices have been paid (and which have not).
2. Don’t be afraid to ask for payment.
Not everyone is comfortable asking for money. If a payment is overdue and you’re down to “demanding” money, it can be even worse. According to American Express, “It’s important to be committed to getting paid…You need to be friendly but professional, and stay firm. If you can’t approach the collection process with this mindset, customers are going to walk all over you.”
3. Know when to start collecting.
You will also want to determine when you will start collecting on accounts. Is payment due on receipt of an invoice? After one week? 30 days? Also keep in mind the policy of the client. Some companies have strict schedules, only paying invoices at certain dates of the month. It might be that every client is different, and that’s when a good software program can be especially helpful.
4. Know the payment history of the client.
With long-standing clients, you will develop a sense of their payment habits. Do they usually pay on time, but now there’s been a delay? Or is the client habitually late? If it’s a good customer who rarely lets you down, you might want to proceed with more understanding than you would with a client that always has an excuse as to why they can’t pay.
5. Consider the amount due.
Sometimes, the effort you put into getting payment can be related to the amount of an invoice. For a large balance that means you’ll get to pay your bills this month, you’ll want to start collecting sooner. In the case of a smaller invoice, you might decide to put off pursuing payment until later.
6. Start sending reminders.
It’s a good idea to start sending reminders before a payment is due. One week ahead is a good time. If a payment is already past due, send a friendly letter or email reminding the client of the invoice. Create a boilerplate you can use for all customers so you’re not spending your time crafting a new one each time, and set up automated sends if possible to make it even
If 30 have passed, take the next step and make a phone call. An email might be missed (or too easily ignored), but phone calls are a little harder to avoid. Hearing a voice on the other end of the phone often works to get things in motion. A conversation might also allow you to find out why the payment is late and work out a way to resolve the issue.
Of course, the client can still avoid you by sending the call to voicemail, and if that happens…
7. Take legal action.
If enough time has passed, and all other “friendlier” methods have failed, a demand letter from your attorney is one of the best ways handle a client that simply won’t pay or refuses to work with you to come up with some sort of plan. The letter should be certified and threaten legal action if the invoice isn’t paid.
While it can be tempting to assume that clients will stay on track with their payments – after all, you provided the service that they agreed to pay for – but in order to ensure your company’s long-term success, it’s important to be proactive when it comes to collecting on what you’re owed. Regular monitoring of your cash flow and setting up a process for accounts receivable can take the headache out of getting paid, so you can get back to growing your business.
