Tired of waiting for checks from certain customers? Some accounts seem to take eons to pay their bills. For small-business owners who rely on cash flow, this can be a real problem.
Here are 10 tactics for getting slow-paying clients from “billed” to “paid” more rapidly:
1. Put everything in writing. You can’t hold customers accountable to payment terms that you haven’t put in writing. If you are requesting payment within two weeks, clearly say so in the contract.
2. Watch out for purchase orders. Many larger organizations require a purchase order request from the person placing an order before the accounts payable department will pay the invoice. When you receive an order from a new customer, ask whether the company requires a PO. If so, the person placing the order should provide you with a copy or, at the very least, a PO number. Include this number on your invoice. This will ensure that accounts payable can match your invoice with the corresponding purchase order — and authorize payment in a timely manner.
3. Ask whether other forms are required. Even if a customer doesn’t send you a 1099 form in January, you may be asked to fill out and submit a W-9 [PDF]. If this is your first time working together, ask what paperwork is required to set you up as a vendor in their company’s system. Be proactive about this.
4. Send invoices right away. As soon as a job is complete or products are delivered, submit your invoice. Whether it takes the company 14 or 60 days to pay, the clock doesn’t start until your client receives your bill.
5. Itemize. Make your invoice as detailed as possible. Itemize all of the work done or products sold. Keep in mind that there’s a difference between detailed and confusing, so be clear. The latter may bring the payment process to a halt.
6. State payment terms. Yes, you explained your payment terms on the initial contract. Do so again on your invoice and any statements you send.
7. Practice situation invoicing. As a small business, you can be more flexible than a large company. Some companies may be more likely to pay several small invoices faster than one large invoice. Invoice these clients often. For customers who require a purchase order, try to invoice everything on the PO at once, if possible. Many companies like to pay purchase orders with one check.
8. Build relationships. Get to know the people in charge of paying the bills. If you can’t meet them in person, meet them over the phone. Learn their names. Moreover, don’t forget these people during the holiday season when you are sending thank-you cards. People who know you as a person will do their best to make sure you are paid. Especially if they know you as a nice person.
9. Use the phone. Don’t send email messages about late payments. Make personal phone calls. Be friendly and open the conversation by verifying that they received your invoice and have all paperwork required for payment (see #3). At the end of the conversation, ask when you can expect to see the payment.
10. Avoid threats. Sure, you have a late-fee policy, but how important is your customer? Imposing a late fee or taking other negative actions may just make the customer mad. Be patient. Only charge a fee if the payment is extremely overdue. After all, which is worse, a late payment or a lost customer?
About Tim Parker
Tim Parker is the owner of ECS, LLC, a company specializing in financial and small business content. His writing has appeared in many of the top financial blogs including Investopedia, Yahoo! Finance, Benzinga, Business Insider, and Forbes. Find him on Twitter @expositioncreat and Breaking Finance News.com View all posts by Tim Parker Read more: http://blog.intuit.com/money/10-tactics-for-dealing-with-slow-paying-accounts/#ixzz2xegmics6