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5 Ways to Make Sure You Get Paid

by Olufisayo
5 Ways to Make Sure You Get Paid

Your business book might be displaying a growth spurt with lots of new customers signing up for your service or product along with a pool of happy repeat customers. Many businesses exhibit a hockey-stick graph when it comes to revenue but an absolute zigzag in their cash-flow chart.

A sale is not really a sale until you’ve been paid.  All too often, companies experiencing a sudden growth uptick often end up with unpaid accounts receivables

A delinquent account is utterly upsetting yet omnipresent. Any business that extends credit is eventually going to have a customer who delays or refuses payment.  There are several steps a company can take to minimize the likelihood of bad debt expense.  Here are 5 best practices:

5 Ways to Make Sure You Get Paid

1. Have a written credit policy with your customers – Make sure your payment terms are in writing and your customer agrees as part of the order and/or sales process. This should include when payment is due and the consequences if they don’t pay in time, such as finance charges, collection costs and attorney fees.

Tip: Make sure you investigate in advance the credit worthiness of customers, especially the bigger the order and the smaller your gross margin on a transaction as you have more at risk.  Credit reports can cost as little as 10 cents and save you tens of thousands of dollars.

2. Follow up consistently and persistently – Begin your follow-up even before your invoice is due. Confirm that they have the invoice and payment is scheduled on or before the due date. You can frame the email or phone call as a “customer satisfaction inquiry” to make sure your customer is happy with the product or service and has everything they need to process the invoice on a timely basis.

Tip: Follow up the day after a payment is late.  Follow up on a regular basis until the invoice is paid.  Use email, calls, text messages and faxes in addition to letters if they are not responsive.

3. Use effective language – Not getting paid on time can be very upsetting and create financial pressure on your business. But getting upset at your customer probably will backfire.  No one ever wins an argument.  In today’s world where it only takes seconds for someone to complain on social media, the wrong approach with your customer can result in no money and bad publicity.  A study by Freshbooks reveals that just by being polite, your chances of getting paid increase significantly.

Tip: Don’t shy away from collection calls and emails. Be confident but not confrontational.  After all, you deserve to get paid for services and products delivered to the satisfaction of your clients.

4. Find a solution together with your client – Even if these are the clients with delinquent accounts, they are still your customers. Be professional and partner with them in trying to work out a solution. Sometimes approaching it as a business problem to be solved instead of debt collection issue will lead to getting paid

Tip: Consider a payment plan.  While you deserve to get paid immediately, a payment plan may be more realistic and will be much faster than going to court.  Document the plan and get your customer to confirm in writing, including the consequences if they don’t stick to the plan.

5. Escalate quickly if an account gets 90 days old – Industry statistics compiled by the Commercial Law League of America reveal that there is already a 27% chance of never getting paid once an account is 90 days delinquent. And the chances of collecting decline more than 1% each week as an invoice gets older.  So unless you have a plan worked out at the 90 day point, it is time to take more aggressive action or the chances of ever getting paid decline rapidly.

Tip: Reputable commercial collection agencies typically work on a contingency basis.  You only pay if they collect.   The sooner you get an agency involved, the higher the chances of them collecting and saving your company from losing money.  Many agencies will also sue on a contingency basis with client’s just paying the filing fees.

It is hard to generate new business and get new customers.  But no one needs a customer who doesn’t pay.  Following these best practices will minimize delinquent accounts and help you collect when problems arise.

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To Read – Wednesday August 24, 2016 - 6:05 AM

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QuickBooks Online Support February 25, 2019 - 6:03 AM

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