As a small business owner getting paid on time is imperative to keeping your business profitable now and in the future. While your customers can come up with range of reasons not to pay you, your employees and suppliers need to be paid on time in order to keep your business in production.
Here are some tips on getting your customers to pay on time.
Review your terms and conditions
When you send goods on credit, you are asking your customers to agree to your terms and conditions (whether implicitly or explicitly). If they don't sign a separate document, this agreement consists of whatever you terms you note when you invoice them. It can be well worth getting a commercial lawyer to help you draft a new set of terms and conditions that make clear your terms of payment, as well as setting out a set of enforceable penalties if the customer does not pay on time.
You can also look to include incentives to pay up earlier, including a discount for early payment. Some large companies and government departments are forced to pay up early by their internal policies if an incentive for early payments is in place, and early payment from customers can reduce your need for working capital. It's a win for everyone.
Communicate with your customers regularly regarding their payment
If you have some customers that constantly seem to 'have a cheque in the mail' to you, you can start to assist them by setting up regular reminders to contact them to remind them of due payments. You can set up reminders for days and weeks ahead of due dates, and in many cases automate communications, to their accounts personnel so there can be no confusion or claims of lost invoices and paperwork.
Get tough
If you are faced with a customer that is just not paying up it may be time to get tough. It can be useful to have a lawyer draft a sternly worded letter to your customer detailing the next actions if they do not pay by a give date, including engaging debt collectors and starting legal proceedings. This can often spur the most recalcitrant customer to payment.
As a small business owner it is important that you don't shy away from chasing up old or bad debtors, as lengthy accounts receivable periods can put the overall health of your business into danger. A good lawyer can guide you through some of these processes.
For more information, contact a law firm like Stokes Legal.
Share9 February 2016
My dad died when I was still pretty young so it's been a big surprise all the stuff I've had to do to sort out his estate. I'm an only child and my folks divorced when I was a baby so most of the work fell to me. He was kind of disorganised and grumpy, but at least he'd spoken to his lawyer and got a proper will drawn up which saved on confusion at a tricky time. If you are a young person dealing with the estate of a deceased parent, this blog is designed to help you navigate the legal processes.