Tuesday, October 6, 2009

Make Them Pay!

One of the most troublesome - and easiest to fix - areas for small business owners is their accounts receivable department.

They may ask for 30- or 60-day payment terms, but they don't always get them. Certain clients may be chronically late payers, and others simply may not pay at all. Ever.

Some entrepreneurs are tempted to fold and chalk the missed payment up to "experience." Not me. I once loaded my babies up in their car seats late on a Friday evening and drove 30 miles to a delinquent editor's home a week before Christmas to demand a check that was three months overdue.

We were in "austerity budget" mode as a family, I had done the work as requested and turned it in on time, and darned if I wasn't going to get that payment! The man answered the door in his bathrobe and handed me a check. And it didn't even bounce.

Needless to say, I didn't do work for that publication again. And yes, they did call me a couple of months later for another project.

The point is, you'll never collect funds owed you if you don't try. Sometimes you'll be spinning your wheels but other times, if you're persistent, you will get paid eventually.

Start by finding out why your client isn't paying. Call to remind them politely but firmly that your bill is outstanding. If they are not responsive, or do not follow through on promises to pay, send a strong letter informing them of your intent to sue. These easy steps may scare your client straight.

If not, and the amount owed you is reasonably small, you can probably file a small claim online in your jurisdiction. You may have to pay another fee for process service and show up in small claims court for a hearing.

If the amount is larger, it may be worthwhile filing a lawsuit. Talk to an attorney about the cost-benefit ratio in those cases.

You can chalk late- or non-payer situations up to experience as well. They demonstrate how important it is to get an upfront retainer from new clients. You can also get their credit card number in advance and let them know you'll bill it directly when the balance is due.

Most importantly, know your customers before you get into business with them. Have them fill out a basic credit application that includes their business information, banking information and client references.

You'll be glad you did.

2 comments:

  1. I can't believe I never commented on this. I read it a week ago and was amazed by your story! Brava!

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  2. Desperation truly is the mother of chutzpah! :-)

    ReplyDelete