Jul 09 2013
Everyone is having trouble getting paid on time in this economy. If you’re a small business owner or a solo entrepreneur, you need to know the strategies that get your customers to make your invoices a top priority. It’s especially important to keep track of delinquent payments during this recession as they can be a signal that worse behavior is yet to come. Take a tip from banks that know how to give out business loans and get paid back on time, and document all the terms of payment in your contracts and invoices thoroughly.
Always let your customers know when they are expected to pay their bill. Some contractors try to reduce the risk of non-payment by spreading out a project into three payments. One is collected upfront to start the work, another is collected midway, and the final one is collected when the project is completed. This can work for companies with a great deal of prestige and social currency, but a small business owner may need offer different payment terms.
Typically, you can ask for payment at the end of a project or within a certain period after invoicing, 30 days maximum. Banks offer credit payments on a 30-day cycle, but you might want to make 15 days. Whatever you choose, be sure to spell out the terms of payment in the contract and in the invoice so that you know exactly when payment is due and when it is late.
Late Penalties and Fees
Next, you should put language in the contract describing the penalties and fees for non-payment. Just like banks might give you a $30-$40 late fee on a bill, or a late charge based on the percentage of the total bill due, you caGetting Top Priority for Your Invoicesn do the same thing. By adding specific language into contract and the invoice, you will know when to start adding penalties and fees. When buyers become aware that they are penalized for late payments, they try to give your bill priority against those that do not have such language in their contracts, and thus aren’t subject to litigation for more monies. Be clear, and know what you want should a customer start to default on payments and convey that to the customer as best as you can for the best results.