Improve your cash flow with my easy to use and implement tips for small business owners.
Late Fees and Interest
Make sure you put a late fee (I use $15 to $25) in your work agreement and spell out how much and when you charge interest on late payment. My terms are net 10 days and on the 28th of the month I assign late fees and interest. Even big companies will adhere to a signed agreement and pay my late fees. So spell out your requirements so you have leverage.
Monitor Payments and Contact Late Payers After 5 Days
My payments are due the 5th to 10th of each month. On the 15th I contact all clients who have not submitted a payment and ask if they need a copy of the invoice and remind them of the date I assign late fees and interest.
I have to say that this is the key to keeping my clients current has significantly improved my cash flow. If you do not enforce your own contract no one else will. If you let people pay you late and not pay the contracted penalties, you are setting yourself up to be paid consistently late. It was only when I started to enforce my own contract with customers and got proactive, well before the late date, that I started to get consistent on-time payment results.
Move Chronic Late Payers to Auto Billing
When a client is a chronic late payer, I try to move them to our auto billing program. This way I have a credit card on file and I bill the card on the 5th of each month.
Move Chronic Credit Card Decline Customers to Prepay
When a client has repeated credit card declines, I move them to a prepay basis before the new service month even starts. That way I do not perform any services where payment is doubtful.
In Conclusion – Be Flexible But Firm
Being in business since 2001, I have seen it all and been stiffed for payments large and small. What I have found is that people will only pay you in the fashion that you detail in your agreement and that then you actually enforce.
There is nothing worse for a small business owner than to perform a service and to never get paid for it or to have to chase down a client for months to get payment for services.
As for me, now, I will simply stop performing services when there is a payment problem. I unfortunately have allowed clients in the past to take advantage of me by ringing up a bill, accepting the promise of a payment next month, and then having to chase them for payment or to having to write off all my billings with that client as a bad debt.
Experience has been the wisest teacher for me in the area of improving my business cash flow. If you have tips on how you keep your own clients current leave me a comment. I’d love to know what you do.
