One of the biggest challenges many small businesses face is getting paid by clients both on time and in full. For whatever reason, many clients are often slow at paying, and a few will try to dodge their financial responsibilities to you altogether.
When you’re a small business, this can really affect your cash flow in a negative way. That’s why we’ve put together a list of tips to ensure your business gets paid on time and in full.
Have a credit and collections policy in place.
As a small business, you should absolutely have a credit and collections policy in place before you even think about doing any work for a client without payment upfront.
Your policy should include things like how much credit your company can afford to extend without doing any damage to your cash flow, what the payback terms will be, and criteria for deciding who you can and can not extend credit to. You should also put into writing your procedure for collection overdue credit – using debt collection and recovery software is great for this as it makes the process simpler and helps you to locate tricky clients. All of this will help you to more effectively recover payments your business is due.
Ensure clients have a credit agreement.
Having your clients sign a credit agreement will ensure that they know their legal obligations towards your business and that you have something in writing should you need to chase them for the money so it is not something you should do without.
Put penalties in place.
If you put financial penalties in place for clients who pay late, you are more likely to get paid in full when and on time because few clients are going to want to pay potentially hundreds or thousands of dollars more if they don’t pay up when they are supposed to.
Automate your invoicing.
If you automate your invoicing procedure, then you can be more confident that clients will be invoiced in time, and if they’re invoiced on time, they are more likely to pay up on time. This is a really simple point, but it is surprising how many companies mess up their cash flow by invoicing late in the day, catching clients off-guard when they haven’t fully budgeted to pay at that time.
Accept more payment methods.
It’s pretty simple, but the more payment methods you offer, the more convenient it is likely to be for the client to pay fully on time, so offer to accept everything from checks and money transfers to credit cards and you will probably be paid exactly when you should be.
Getting paid in full and on time is often difficult, but if you lay out exactly what is expected of your clients, and make it as convenient as possible for them to pay when they are supposed to, you stand a much better chance of being promptly paid which is exactly what your small business’ cash flow needs to happen.