How to Collect All the Money You’re Due

Business owners typically have enough on their plates without having to chase down payments from customers and clients, but unfortunately, that can be part of an entrepreneur’s job. Sometimes clients are slow to pay, while in other instances they might say they need more time — or they simply stop taking your calls and go dark.

Hunting down payments you’re due not only takes up a tremendous amount of time, it can also put a serious dent in your cash flow. When you don’t receive money you were expecting, you may need to change your business’ projections or even scale back your plans as you await the cash.

If you’ve found yourself in this situation before, check out these tips that can help you quell this issue in the future.

Make Sure Your Expectations Are Clear

When you first forge a relationship with a new customer, ensure that your terms of service and/or contract are completely transparent regarding the payment schedule. Whether you’re requesting monthly payments or a lump sum by the end of the job, ensure that every detail is in writing and signed by both parties so there are no surprises.

If the customer is then late with payments, you can remind them that the contract terms dictate when payment will be made, and that you’re checking in to see where the money is. This can sometimes feel like an awkward conversation, but if the payment terms are right in the contract, it’s much easier to make that call.

If you offer discounts for early payments (or for checks vs. credit cards), mention that right in the contract so clients are aware of these potential advantages to paying you quickly.

Don’t Put All Your Trust in New Clients

Unfortunately, you can’t trust every new client you sign, and sometimes that means collecting money up front when you’re with a customer that your firm doesn’t have a history with. This is especially true for big-ticket jobs — you don’t want to do six months’ worth of work for a new client and then send a $20,000 bill, for instance, only to find that they aren’t good for the money. Instead, vet all new clients by contacting references and requesting referrals, ask for a partial payment up front, and consider charging them monthly at first if possible.

Some businesses find success by keeping a credit card on file, particularly for new clients. That way, as soon as a bill is created, it will be charged to the credit card and a “paid” invoice will be sent back to the customer so they know you’ve collected the money.

You’ll also want to forge personal connections with your new clients. Sometimes a client may be slow to pay a “company” because they see it as a faceless entity, but if you have a personal relationship with the customer, they may be more likely to pay because they don’t want to disappoint you or let you down. In addition, such connections will make it easier for you to ask about payments when necessary, since you will know who to contact and you’ll already have a rapport with them.

Send Bills Quickly, and to the Right Contacts

You should have an invoice ready to present to the client as soon as you render your services, or right on the dates stipulated  in your contract. Don’t wait too long, since that is likely to slow your payment. In addition, make sure you’re sending the bills to the right contacts. If you’re simply addressing invoices to an “accounts payable” email address, you won’t know who your follow-up contact is, and you won’t be able to track down where your money is.

Instead, find out the name and contact information for the accounts payable contact from day one, so you can send invoices to them and follow up when necessary.

Don’t Wait to Follow up

If the terms of your contract state that you’ll be paid by the last day of the month, for instance, don’t wait until the 20^th of the following month to ask where your money is. As soon as you realize a payment is late, offer a gentle payment reminder to check in on when you might expect the money. In some cases, you may find out that the company mails their checks on the 30^th, but the mail takes a few days to arrive; or in other instances, perhaps the bookkeeper is on vacation. However, you won’t know until you check in and find out what’s going on.

If, after your initial reminder, the client still doesn’t pay, you can set up your invoicing system to automatically generate a late notice after a certain amount of time. For instance, if the client doesn’t pay by the due date, perhaps a letter will go out to them two weeks later with a payment reminder. 

Of course, if things get really stressful, you always have the option of turning the account over to a collection agency or taking legal action. But in most cases, the best policy is a proactive one, in which you take the steps above to ensure that you don’t get to the point of having to bring in attorneys or bill collectors.