In a perfect world, we would provide our services or sell our goods to our customers and clients and they would pay us. It sounds simple and it is the very foundation of a business. However, as many of us know, it does not always work that well. Many of us find ourselves hounding customers and chasing after clients. It is never fun, but often a necessary part of running our own home businesses.
When I first started my home business and working on my own—I had two clients who were less-than-professional and just didn’t want to pay me (or couldn’t.) I have to admit that the experiences helped me to solidify my business and make some changes and adjustments that have made my business stronger in the long run. I learned how to pre-screen and what to look for in the initial contact to identify those clients who were likely to be a payment problem, and I learned how much time to spend chasing payments and following up, AND I learned how to diversify my revenue and cash flow so that I didn’t feel so much stress about missing payments.
A clear contract and payment policy can help set clear expectations. I confess, however, that the two troublesome clients (one who NEVER paid me) both read and signed contracts and seemed to be in agreement at the onset. Still, having a good contract can give you a good foundation for collecting payments. I also learned to start the collection process early. The first time I ran into an issue, I let the payment slide for a full month until my invoicing cycle came up again. I just “assumed” that the payment was on the way and thought I would allow them the full thirty days allotted in the contract to pay. Instead, I think it is best to follow up with a reminder after two-weeks. That way you can send a second, sterner request for payment at thirty days.
Don’t be afraid to use the phone. People are less likely to keep putting you off once they have made a commitment on the phone. Also, make sure that you talk to the right person from the very beginning—talk to the person that authorizes and/or makes the payments from the start—don’t let them give you the runaround and refer you from one person to the next.
Decide how many reminders you will send, whether or not you will assess a late payment penalty and what your next and/or final step will be in advance and put it in the contract or in writing. Of course, you will have to decide how long and how diligent you want to be about chasing a payment. The truth is, some people may NEVER pay you and you’ll learn some hard lump lessons. You can follow up with suing them or reporting them to the appropriate Better Business association, but you will need to balance out whether it is cost-effective. You may decide to take your lessons, end the business relationship and move on.
See Also: Delinquencies and Credit Issues
Collecting on Outstanding Accounts