Do customers owe you money?

Spread the love

Yesterday I was speaking with a friend who had spent the weekend working on her books. Turns out she has $20,000 in outstanding invoices. For a solopreneur, that’s a big chunk of her annual income that is overdue.

This outstanding balance is affecting her business because she’s now having to make decisions based on the balance in her bank account, not her business plan.

And according to her, the people who haven’t paid aren’t businesses struggling because of the recession. These are healthy, successful businesses. They just aren’t paying. In fact, some are months past due. To add insult to injury, a couple of clients “forgot” to pay their deposit so at this point she’s out the entire fee.

My friend has been sending out reminder notices and has added interest onto invoices but so far, no results.

So, if you’re in a similar situation, what should you do?

First, make sure every client is clear on your payment terms before you start work. Some people feel uncomfortable talking about money. If that sounds like you, get over it! You’re in business and that means you need to be able to talk about money.

Second, make sure to send invoices right away. If you provide a service, have the invoice prepared and give it to the customer on completion. If you provide a product, include the invoice with delivery. The sooner the customer gets the invoice, the sooner they will pay.

Next, you need a system for following up on invoices. Any invoice that is past due needs a reminder notice send immediately. Don’t wait a week or a month. As soon as it’s past due, send out the reminder.

If you don’t get a response after the first reminder notice, I’d suggest it’s time to put away the stamps and pick up the phone. Call and ask when they are sending the payment. Be polite but don’t just accept a vague “soon”. Ask for a specific date. If they can’t pay the entire amount, ask for a payment plan with the initial payment sent immediately. Some money is better than none.

If an initial phone call doesn’t work, you may have to try again. This time be sure you’re speaking with the correct person. If it’s a small company, speak to the owner not the book keeper. If it’s a larger company, speak to your customer not the accounting department. Enlist their help in getting paid.

Over the years I’ve known a few small business owners who seem to make a game out of how long they can get away without paying anyone. If you have a customer like that, the best suggestion is to drop into their business unannounced and ask if you can pick up the cheque. Be sure to have a copy of the invoice with you because in all likelihood they will be unable to “find” the original invoice.

The key to outstanding invoices is to stay on top of them. If you wait too long, the customer will have forgotten the value of your product or service and feel less inclined to pay. Also, if they still owe you money, you’re not going to get more business out of them. If they need your product or service before their outstanding balance is paid, they may just go to a competitor.

A word about deposits. If you routinely require a deposit before starting work, don’t make exceptions. If someone “forgets” to bring their chequebook when they place the order, simply tell them to drop it off when they can and you’ll get started on their work as soon as you’ve received it. Unless this is your best customer, don’t go ahead without it.

After all, if they can’t manage to make that payment to ensure you start the work, how quickly are they going to pay you once they have the finished product in their hands? It never fails: whenever you make an exception about deposits, that will be the person who doesn’t pay.

Remember, you provided good value to your customers. You deserve to get paid. You are not making unreasonable demands, just insisting you get paid what was agreed upon.

Andrea J. Stenberg

I’m going to follow my advice and send an invoice to a client. What are you going to do today to ensure your receivables are up to date?

Related posts

What’s your relationship with money?

Spread the love

Spread the loveTweetIf you are in business you must focus on making a profit. Without profit, without earning descent money, you don’t have a business,

Read More »

What Are the Secrets of Earning Six Figures?

Spread the love

Spread the loveTweetOne thing I’ve learned about entrepreneurs is that we’re always learning – about our industry, about marketing, about business. We go to courses

Read More »