Filing business taxes is not only a time-consuming process, but it can also be eye-opening. One issue that tax season — and your accountant’s raised eyebrows — may need to be presented to mild? The accumulation of good receivables on your balance sheet. If you’re not being paid as often as you’d like, there’s some good news (if you can call it that): you’re not alone!
Thousands upon thousands of small businesses are stiffed or are not paid on time every day. According to the National Federation of Independent Businesses, slow or late payments are one of the most significant challenges that businesses face when receiving the money they are promised.
So, what are your options? If you’re like most small business owners, dealing with late payments isn’t your strong suit. However, NET 30 does not have to be “NET when I feel like it” or “NET by no means.”
Here are a few simple and tried-and-true methods to speed up cost time and ensure you get paid for your labour.
Obtain a Contract Before You Begin
Contracts are frequently thrown into the “I know it’s important, and I’ll get to it eventually” basket. While it’s natural to want to get right into projects, having a contract in place ahead of time is a crucial legal step in ensuring you get paid. It’s also a matter of excellent business sense.
A contract should include explicit instructions on the services you offer to supply and pricing terms. Even simple things like “we’re going to do that,” then “you’re going to do that,” and having it down on paper might be better than nothing. When drafting such a contract, it’s best to deal with a local attorney familiar with your industry. If you can’t afford that, Freelancer’s Union Contract Creator is a great alternative that can be tailored to meet the needs of small businesses.
You imply it right now.
You’d be nothing without customers, yet allowing late payments to pile up makes you seem risky, unprofessional, and financially damaging. You’re effectively providing no-interest financing to your customers when you do this. Go for it if that’s the business you want to be in.
I think that’s not the case, so build up a system for following up on invoices and, if needed, reminding them of the pricing terms and the contract they signed with you.
It is preferable to act sooner rather than later.
Anyone in the collections industry will tell you that the more active you are early in the cost cycle, the more likely you will recover part or all of your money.
Typically, you wait a few weeks, then get busy with other things, then feel bad for not following up sooner and wait a few more weeks, then “abruptly” it’s a lot larger problem than you intended. Do not allow this cycle to begin. Focus on consistent follow-up and start early in the cycle to improve your chances of receiving what you’re entitled to.
“Why?” you may wonder.
Is there an internal issue causing someone to pay late, or is there a relational issue to be addressed? The “how’s” of being paid on time will become clearer with a better understanding of the “why’s” and an open line of communication with accounts payable.
A delayed cost may often highlight distinct aspects of a business, such as good project deliveries. Additionally, this may assist in identifying red signals to determine whether or not a buyer is even cost-effective so that you may proceed.
Examine it in person.
At one of my earlier companies, we used couriers to collect payments from late-paying customers in person to pay them. It seemed strange, but it worked. We recently heard a storey about a large PR firm that would send top executives out in person, sometimes travelling across the country, when a check was good for too long.
When things are tough, you have no choice but to be creative! Similarly, setting up a drop-by meeting may be enough to obtain the check and reignite the embers of the relationship while you’re there. It’s easy to delete someone’s electronic messages, letters, and so on., but it’s far more difficult to refuse to pay when that person is standing right in front of you.
Outsource the Course of Instruction
There are tools available, such as the one offered by my business, that provide a non-painful, automated way to track down late payments and send delinquent accounts to collections. You might also get advice from your accountant on debt collection.
Whatever technique you choose, keep in mind that the fastest way to make any accounts receivable programme successful is to start collecting late bills as soon as possible. If you have a 600-day outstanding debt, the chances of your buyer (or, at the time, prospective ex-customer) paying you are small.
What measures do you use to ensure you are paid on time and deal with late payments?
Have you ever done anything wacky like sending couriers to acquire cash for you? I’d be interested in hearing about your experiences in earning what you’ve earned.