A common problem for small businesses across all industries, verticals is that of getting paid on time. And most often than not, one finds business owners worrying about how to get their dues collected from their clients. Constant reminders, repeated follow-ups with the accounts departments, can leave one running around in a maze and frustrated.
Resulting in a colossal waste of time and resources. While you may not want to deal with your precious clients with a heavy hand, it is important to have certain rules in place with regard to ensuring payments from your clients. Let’s take them one by one:
• Know your customers:
This does not apply to over-the-counter-payment business models where a client is bound to pay immediately upon receipt of services – eg, retail, beauty salons, online portals, etc. Instead, this applies to businesses like small agencies — advertising and media agencies, video makers, event management unit, etc where payment is upon raising invoices after a stipulated period.
In such cases, it is important that you do a background check on the prospective client. Also, you may try to take references before taking on new clients.
• Manage your invoices:
• Try to raise invoices immediately upon completion of work or silos of work. Do not wait for the month to end • In cases where vendor registration takes long and you have to wait for the stipulated time, make sure that you have the paperwork ready so that you do not waste time once the window to submit invoices opens
• Try to have a clause of discount upon on-time payment – this will save you the trouble of continuous follow-ups and phone calls. Accordingly, have a clause of penalty for late payment in your contract in order to discourage your clients from paying late. • You may also include a clause for advance payment/deposit while drawing up the terms of the agreement
• Make sure you have various forms of contact information, and that the customer has yours Also remember that it is a good business practice to:
• Ensure that you know the cut-off date for invoice payment
• Break down the project into small, billable chunks
• Ensure that your billing calculations are correct
• Ensure that the invoice you send is not editable by your client (use a PDF if sending via email)
• Ensure that you know the right people for payment follow up, especially if you are dealing with a large company
• Ensure that your records/accounts are accurate and up-to-date Ensuring cash keeps flowing into your business is important as it will help you take a number of decisions and embark on new strategies. Hence, it is imperative that you get paid by your clients. And on time.