Running a business is great when you’ve got regular customers. You’re happy that you offer a product or service that people are willing to buy. The only thing that makes you sad is when some folks don’t fulfill their end of the deal.
Non-paying customers is a problem that almost all businesses have to deal with. Some clients genuinely forget to pay an invoice, while others delay payment on purpose. You work hard to produce the products and services that you offer. The last thing you want is for your clients to take advantage of you!
So, what can you do to increase the chances of getting paid on time for what you do? It turns out that you’ve got quite a few options at your disposal.
Keep your cash flow healthy
The first thing you need to do above all else is make sure you’ve got a healthy cash flow. If some of your bigger clients don’t pay on time, you could end up going bankrupt. You should always keep a reserve of money in the bank for any adverse situations.
So, how could you do that? One option is to set aside a percentage of each invoice that gets paid. You can then build up a sizeable reserve of money in your account.
Another option is to take out a short-term cash loan. If you have to pay for raw materials, borrowing the money to cover the costs will help. You won’t have to deplete your bank account of money. In a way, you will get paid faster with a short term loan! Just ensure you can afford to pay the loan back as agreed with the lender.
Get paid per milestone
Many businesses usually provide a product or service and then bill for it at a later stage. If you’re a small business, doing so could cripple you if you end up with lots of non-paying clients. One way around that problem is to ask for payment per milestone.
For example, let’s say that you are a freelance Web designer. You could ask for a 25% deposit upfront. Another 50% when you complete half the work, and the final 25% upon completion. The milestones and amounts you agree are, of course, up to you. The above is just a typical example.
Get into the habit of chasing for payment
It’s worth investing in a system that emails clients when they haven’t paid you by the due date. Some accounting programs can also help you send out reminder letters at certain intervals.
You should make sure you keep on top of chasing for payment. Even if you get on well with your client. Nine out of ten times you will get paid with just one or two gentle reminders.
Threaten legal action
If all else fails, you can remind your client in writing that you will take legal action to recover your costs. I guarantee you that the mere threat of getting sued is enough to make most clients pay up!