In a tough economy where your sales number could be taking something of a hit, it’s more important than ever to make sure your clients pay up. Here are a few ways to do it.
* Stop offering credit. Ask your bank for a merchant agreement and take credit cards. Many businesses skip billing the customer directly and let the credit card company do it.
Explain to customers that you no longer carry accounts receivable and ask for a credit card number. Usually, you’ll get it. If they won’t give a credit card number, you can be pretty sure they won’t pay you in 30 days either.
You might remind the customer that your previous credit terms called for payment within 30 days, but depending on the closing date of their credit card account, they could get up to 60 days to pay without incurring interest. That is, if the closing date on their statement is the 15th and they buy from you on the 16th, the charge won’t appear until the month-after-next’s bill.
You still have to send an invoice, but the nice thing about it is that it will be a paid bill.
* Offer a discount. If you don’t ask for credit cards, you could give a two percent discount for payment within 10 days, 2/10 net 30 terms are common in many industries.
* Get a billing system that alerts you to past-due invoices. Experts writing in Money magazine suggest numbering invoices according to the month they are charged. For February, that could be 2009-02-001 on the first invoice. Make an open accounts folder so you can easily see who hasn’t paid.
Always send the bill immediately after the customer has received a service or after a product has been shipped.
* Follow up on unpaid invoices as soon as the terms have expired. Call to say you missed getting their payment. Be nice. If the customer admits to being short right now, consider asking for a partial payment with the balance to follow in one or two months.
* If a customer doesn’t pay up in a few months, you could either give the account to a collection agency or decide on small claims court. Small claims court can take several months, but it doesn’t cost much to file, usually about $45. If debtors don’t pay the court within a certain period of time, the court can put a lien on their property.
A collection agency will probably get the money, but you will pay a third to a half of it to the agency.
* When you will be issuing large invoices and need the money now, consider a factoring service. It will buy the invoice for a percentage of its value and send the money right away. Find a service at factorscan.com.