Many business owners face this dilemma, I am busy, but the cash isn’t making its way to my bank account. I know what you may be thinking, this should not be a problem, but it is a problem for more businesses than you would think. In fact, many accountants would do well by more aggressively trying to collect on their overdue accounts. So, as a small business owner where do you start?
The first logical step is to set forth a plan of action. Without a sound plan you probably will not know who you should be collecting from, what types of things that should be said, and what types of results are realistic for your business. To help you set up an action plan here are some helpful hints.
1. Ask for the money. If you have completed work or have signed contracts which have payments in arrears, you have to be willing to demand payment. That doesn’t make you rude, it is as much how you ask for payment as it is what you want them to do, if you don’t ask for payment, they might not realize they are behind on payments.
2. Hold work until payments are satisfied. If you are in a position where you offer ongoing services, or better yet you have not delivered the product simply withhold the work until you are paid.
3. Offer a flexible payment option. If you have a really good customer whom you don’t want to lose, but also whom you can’t collect payments from on a regular basis, suggest a payment plan that can work for both of you. That way you keep your best customer and you are happy with the result. Just make sure that your agreement is enough to cover continuing work so that amounts owed do not keep piling up.
4. Consider adding late fees or pre-payment agreements with certain customers. For your habitual offenders this is often the best option. They will not like that they are charged interest on the money and may pay up. One word of caution, it is best to talk with your customers before you make this change; it is never good to give your customers bad surprises.
5. Always the last resort, take the customer to collections or small claims court. You want to exhaust all other options before this one as you are likely to lose this customer after this step. Unfortunately, this is often the only way businesses can collect on amounts they are owed.
Once you have your plan of action formulated, follow through with your efforts. It is stressful for most people having to call and ask for payment, but more often than you would think people are willing to work with you to make things right.