5 Easy-To-Implement Strategies To Get Paid On Time

We all want our small businesses to run like well-oiled machines. But when a client doesn’t pay their bill for your product or service, everything is affected—from your ability to Pay Yourself First to hiring contractors. Not to mention all the stomach-churning anxiety.

This is true whether you’re running a multi-employee small business or a solo consulting practice. Recently, one of my clients was late paying a $2,000 bill. After 30 days, I started wondering if I should stop one or more automatic transfers to my multiple sub accounts.

Unfortunately, even when you’re working a solid, Financially Fit program around your own personal finances and business, you still run across clients who are slow to pay and need a little nudge. Or who argue about their invoice and the service you rendered and refuse to pay up.

So what’s a small business owner to do to get paid on time? Fortunately, you have options.

Preparing Up Front

Your client may have all kinds of reasons for not paying you from extreme dissatisfaction to a lack of cash.

Regardless of the reason, the best way to buffer your business against a late payer is to proactively try to prevent non-payment before you start work.

Whether you’re just starting out or have been in business for years, here’s how to get paid on time:

  1. Putting the right protections in place. Covering yourself financially in the event of disaster or client nonpayment starts with purchasing the right protections. This includes health insurance, homeowners insurance, workers compensation and retainer fees for a small business attorney.
  2. Boosting Your Security Buffer. Before you start your venture, or expand it, make sure you have enough savings to cover at least one month of costs (ideally, you should have more like six months’ expenses in the bank). The more cushion you have on the front end, the better you’ll weather a big blow.
  3. Requiring a deposit or retainer. When clients pay you in advance, before you do work for them, you don’t have to worry about nonpayment. Unfortunately, many industries and organizations don’t operate this way even if you ask nicely. If you do have the flexibility to ask for upfront payment, consider offering a discount to your client to sweeten the request. Or require a deposit to start work.
  4. Vetting new clients. One successful small business owner we know swears by a LinkedIn social media group whose members call out client organizations that don’t pay their bills on time. Doing a background check on a potential client that includes a credit check will help you gauge their solvency.
  5. Outlining payment conditions in contracts. Smart businesses outline work stipulations, including payment expectations, in writing, before the start of a project or contract (e.g., “payment due upon receipt of invoice on the 15th of the month”).

What To Do When Non-Payment Happens

When you’re invoicing your clients at a specific interval, expecting them to pay on time is reasonable.

If payment is due by the fifth of the month, on the sixth, ask when payment will arrive. If the client still doesn’t pay after 15 to 30 days, you may have to nudge them a little harder. Maybe by putting a “stop work” on their account until the payment comes through.

If you’re owed a large sum of money, you may need to consider small claims court. If the amount owed is eligible, you can recoup some of the money owed without hiring a lawyer. Some small businesses have used social media to call out organizations for non-payment. That’s a risky strategy, but could be an option worth exploring out of necessity.

You could also just let it go. I still haven’t been paid $200 for a New York City-based magazine copy editing gig in 2008. And the magazine apparently went under in 2010! Given the effort required to chase a relatively small sum of cash, sometimes simply walking away is easier.

Whatever strategy you pursue, be gracious and professional. Stick to your payment policy. Send timely invoices and friendly reminders. Communicate regularly, and ask your clients if they’re happy with your work. Chances are most clients will be more than happy to pay you on time. The silver lining for the ones that don’t is often a valuable lesson for future business relationships.

 


The views and opinions expressed are those of the guest author and do not necessarily reflect the views and opinions of MindShift.money.

image credit: Bigstock/AndreyPopov

Marisa Torrieri is an award-winning journalist and freelance writer specializing in personal finance, business, healthcare and technology. She has a master’s degree in journalism from Northwestern University and resides in Fairfield, CT. Her work has appeared in dozens of media outlets, including LearnVest, Forbes, The Washington Post, Business Insider, TIME and Health.com.

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