As a small business, you probably don’t have the capital or the time to deal with slow paying customers. Whether it’s a business with an accounts payable department twice the size of your company or a fellow small business with somebody who doesn’t consider prompt payment a priority, the results are the same. You need consistent cash flow and you don’t have time to chase down the check.
Calling and making demands isn’t going to help your relationship moving forward so focusing on positive ways to give them a gentle nudge is a better practice. Here are some ideas.
Put it in Writing
You have heard it before, but from the smallest job to the largest, have a contract. The contract should outline the scope of the job, invoicing information, and payment terms. The old cliché is applicable here: “the shortest pencil is better than the longest memory.” The days of a handshake for a contract are gone.
Invoice with Delivery
If a company has a policy of paying within 30 days, they are likely talking about 30 days from receipt of the invoice. If you finish the work and wait until the end of the month to invoice, you might not see the payment for a total of 60 days. If the company has a history of taking their time, call to verify they received the invoice.
Although it was on your contract, restate the payment terms on your invoice. Place them at the top in larger type. (Not obnoxiously large but make them stand out)
Keep Invoices Small
Not all invoices are created equal. Small invoices that don’t require approval by numerous people may result in faster payment. If it is a large job or order, invoice as you reach certain milestones. Discuss this with the customer from the beginning.
Lack of detail results in waiting longer and returning phone calls and emails requesting more information. Take the extra time to provide detailed itemization. Avoid abbreviations if the meaning is unclear. It will save you time in the end. Accounting software packages make itemization fast and easy.
Get Yourself Set Up
Standardize your process for working with new customers. Do they require you to complete company forms, background checks, tax information, and non-disclosure agreements? Ask about that as soon as the customer approves the job. By submitting paperwork early on, you won’t be waiting even longer for payment.
Form a Bond
People will work harder for others who care about them as a person. For your regular customers, take the time get to know their accounting staff. If they are local, stop in with some cookies or buy them lunch from time to time. Taking a genuine interest in somebody may not only result in faster payment, it is the human thing to do. If you have to call to check on the invoice, try to speak to the same person each time to form a relationship. Start and end the conversation with something positive and uplifting. Only in the rarest of circumstances should you let the conversation become agitated or threatening.
Sometimes, there’s little you can do to speed up payment. In those cases, try to schedule work in a way that creates a constant income stream. If you do it correctly, after three months, you won’t notice the slow payers as long as they pay within a reasonable time frame.