Small Business: Getting Paid on Time!

Of all the roles small business owners perform, the one that's most hated is that of bill collector. The reasons are many: the time it takes to follow up with late paying customers, the fear of alienating a big customer, and, maybe a deep-rooted feeling that it's just not "nice" to ask for money.

No matter how much you dislike playing bill collector, it's a job that has to be done. You can make the task less odious and minimize future collections problems by implementing some or all of these procedures.

1. Establish a payment policy and put it in writing

Collecting from customers is much easier when you have a policy in place. If you expect your customers to pay on time, you need to define what "on time" is. If you don't put your payment policy in your contracts and include the due date on invoices, you may expect to be paid within five days and the customer may figure they can wait a month or two to pay.

2. Run a credit check on customers, when appropriate

Depending on the size of your average order, it may not be practical to run a credit check on every customer who asks to be invoiced. But if the dollar amount of a particular order is substantial, do the credit check.

3. Find out in advance when big corporations will be paying you

Bigger companies sometimes have their own accounts payables procedures in place. They pay in the time frame their internal policies dictate, not yours. That time frame could be 45 or 60 days or more.

4. Find out exactly how each customer should be invoiced

Who should get the invoice? (The person who placed the order may not be the right person.) Should it be sent in e-mail or through the postal service? What is the correct address or e-mail address? What information should be on the invoice? Do you need a purchase order number, contract number or anything else to be paid? The bigger your customer, the more likely it is that some small bit of missing information could delay payment.

5. Have someone other than you or your sales people make the collections calls

It's much easier for a person to make collection calls when that's one of their duties, and they don't have to interact with the client in any other way.

6. Pick up the phone and call

If your initial friendly reminder of a payment being due doesn't produce results, call the customer. Ask if they got your invoice and if everything was satisfactory with the product or service. If the answers to both questions are yes, then ask when payment will be mailed. Record their answer along with a new date to follow up if payment hasn't been received.

7. Invoice your customers promptly

Don't wait until the end of the month (or until "next week when I have more time") to invoice your customers. The sooner you mail the invoices the sooner you'll get paid.

8. Stop worrying about losing the customer

Many small business owners worry that they'll annoy customers and lose them if they inquire too soon or too often about unpaid invoices. As long as you have delivered what you promised to your customer and make your initial collection inquiries polite, the majority of your customers won't mind.