When payment is due. In the case of major jobs,
consider requiring part payment up front with the balance
due on completion or in stages throughout the project.
You should issue your invoice upon delivery of the goods or
completed service (unless you are receiving payment in
instalments throughout the project in which case you issue an
invoice for each stage of the project at which payment is to be
Make sure your invoice is clearly laid out and easy to
understand. Make sure payment terms are unambiguous.
There should be no doubt when payment is due. For
example, "Payment is Due on Receipt", "Net 30 days" etc..
If you intend to impose a late payment penalty if the
invoice is not paid on time, make sure this appears on the
face of the invoice as well as details of any discount you
offer for early payment.
Most customers will simply pay you when due. Others,
unfortunately, will not. You need to have a process to
make sure you get paid.
To begin with, pay attention to your receivables
position. Set aside time each week to review and take
action on outstanding accounts. This will undoubtedly be
one of your least favorite activities. No-one likes having
to call up debts. Don't put this off though. You have
the best chance of getting what's yours if you act
quickly and decisively, before a debt has the chance
to become doubtful, let alone bad.
So, monitor your receivables and be on the lookout
for danger signals which include habitual slow
payment, broken payment promises, unreturned calls
and postdated checks. Keep an eye on accounts where
you know the customer is changing banks or refinancing
too. This can be a symptom of cashflow problems.
When an account becomes overdue, take immediate
action. Establish a debt collection routine and carry it
out. Here's how to go about collecting overdue debts:
1. Call customers whose invoices are overdue.
First off, find out the name of the person responsible for
accounts payable. If that person is not available when you
call, try and find out when is the best time to reach them.
Make sure you get the name of the person taking the
message (this is an excellent way of increasing the chance
that your message will actually get passed on!) and ask
when the person you need to speak to will be available.
If the person you need to speak to uses voicemail, leave
a detailed, complete message and a clear request that
he or she returns your call as soon as possible.
Create a sense of urgency but be pleasant and courteous
at all times. After all, there may be a problem you don't
know about. The customer may not have received your
invoice, for example. This sometimes happens if the delivery
address is different from the billing address. If you enclose
your invoice in the delivery package that goes to the delivery
address, the billing address may never receive it! Or there
may have been a problem with shipment. At least you'll
find out if you make the call.
If there is no good reason why the account hasn't been
paid, get a commitment from the customer to pay you
today. Expect payment and convey that expectation to
your customer. After all, if you don't believe it, neither will
2. The Check Is In The Mail
If you're told the check is in the mail, ask when it was
mailed and also ask for the check number, the amount and
the address it was mailed to. If the check hasn't been
mailed at all, you'll know.
3. Don't be Fobbed Off
If you believe you're being fobbed off, it's time to escalate
things to the next level. Remain courteous and polite but
start pushing for a resolution. If the person you're dealing
with says they need to make enquiries and will get back to
you, establish a time to call back and follow through. Make
sure the other person knows you're not going to just let this
go. No one likes to be hounded so if it's within their power,
they'll get you paid and off their back.
Other ways to push for resolution are to make arrangements
to send a courier to collect the check, agree a new payment
date or even agree to payment in instalments if you believe
the problem is a genuine inability to pay as opposed to mere
unwillingness. If, however, you conclude that your customer
has the ability to pay but, for whatever reason, is trying to
avoid payment, don't be offering any compromises. That just
sets the scene for a repetition in the future.
4. If All Else Fails
In most cases, being persistent and firm in your insistence
that you be paid will result in exactly that. In a very few
instances, however, despite your best efforts, a customer
will simply not pay you.
Your response to non-payment in these circumstances will
depend on your customer's capacity to pay and the amount
of the debt. After all, there's little point going to the expense
of hiring a collection agency or a lawyer to recover a debt that
your customer is simply unable to pay. Similarly, you have
to weigh these costs against the amount of the debt.
Sometimes the best business decision is to cut your losses
and write the debt off. Naturally, you NEVER extend credit
to this customer again.
If, however, the debt is significant and you have reason to
believe the customer is capable of paying, then by all means
engage a collection agency or a lawyer to pursue recovery.
In these cases be sure to include your recovery expenses
in the amount to be recovered.
And don't forget your supply terms. If these included a
retention of title clause and the goods can be specifically
identified as belonging to your shipment, by all means,
Elena Fawkner is editor of A Home-Based Business Online ...
practical ideas, resources and strategies for your home-based
or online business. http://www.ahbbo.com