By April 18, 2022
There’s a reason large company’s have entire departments for handling accounts receivable. Handling it well keeps the lights on, everyone paid, and you happy. But as a small business owner, you have probably realized how easy it is to mess up or even have it messed up for you.
When I first start work with new clients who are struggling to make ends meet consistently, I often see problems with their accounts receivable departments. Cash flow is impossible if you aren’t getting paid in a timely manner. It’s easy to identify if you have a cash flow problem by looking at how much money you have coming in compared to how much is going out. If you have more debts and payments which take money out of the business than you have payments coming into the business you have a problem.
When my clients tell me they are busy every day but still running into cash flow problems, I usually find that they are having issues with non-payment. Clients not paying their bills is a problem that hits your wallet and your entire team as well. It can leave you feeling exasperated and stressed. But I have found that one or a combination of three solutions works wonders.
Early monthly billing and discounts for early payments are ways to remind and incentivize your clients to pay when you use extended payment terms. Sending the bill early, allowing for electronic payments, and setting automatic reminders can put you at the head of the line in terms of awareness of the bill. Tools such as Bill.com can help you get paid twice as fast and eliminate a lot of payment issues. And if you offer a solution that gives them a discount for paying early, you can convince your clients to prioritize paying you ahead of time as we all want to save money. I have found that 2n30 payment terms (net 30 terms with 2% off for early payment) work well for my clients.
While the previous method is a positive method, you can also use negative methods to get payment. Late fees are one of the options you can use to incentivize payment. Nobody likes late fees, and you may feel like they are scummy, but they work. I do however advise that you be upfront about any late fees. Late fees that you never warn your clients about are scummy. But when you tell your client ahead of time that if they don’t pay on time they may face a late fee of x amount, and you remind them of that before the payment date, they will be more likely to listen.
Unfortunately there are no guarantees that your clients will pay even if you use the methods above. That’s why I encourage you to also use a service like Legal Shield. They are more than just a legal advice company that can help you set up contracts. They also have an entire set of debt collection tools with their Protection Plan that can help you recover money when a stubborn client refuses to pay. I have used and support their products for my clients. If you would like to sign up or learn more about how Legal Shield can work for you, click here.
It’s easy to talk about these solutions, but implementing them can be challenging. But you don’t have to face that alone. I am here if you need help making the changes, and if you are one of my clients, I will actually help you implement them in your business. I’m only a phone call away.