Getting paid on time is essential if you want to run a successful business. Having to chase payments which are not coming in on time from your clients is an ineffective waste of time and costs your business. According to research conducted in 2012, small business owners are being crippled by $1.2 billion worth of late payments.
Therefore you want to ensure that you employ effective methods to guarantee that the majority of your clients are paying on time.
Here are the top four tricks you can use in order to get paid on time:
1. Establish Clear Payment Terms at the Start of the Contract
Ensure that you have the payment details organised with the client when you create the initial agreement. In this document clearly state both the time the invoice will be sent and the date on which it is expected to be paid by.
It is also a good idea to include in this document penalties for late payment.
If a client does not pay on time then you can show them the clear terms of the contract.
2. Enforce Late Penalty Charges / Early Payment Discount
Sometimes you have to resort to late penalty charges in order to ensure you are getting paid on time. Laws vary between countries in regards to what you can charge. Some legislation allows you to charge interest on what you are owed.
This might not stop a late payment in the first case, but if you are strict and show that you are willing to charge a late penalty the first time round – a second late payment is unlikely to occur.
On the other side, you could always offer a small discount for those who pay by a certain date. Companies are always looking for ways to cut costs and therefore by offering a way to do so by paying on time will create an attractive proposal.
3. Make Sure Payment is Received Before You Deliver the Final Product
Once you have completed the project, hold back enough and ask for the final payment before you deliver the remainder. Some small business owners think this is rather unprofessional, but there are a number of cases where the owner of a small business has given over the final product only for the payment not to be forthcoming.
Some technical businesses can get round this by including a shut off switch where they can stop the use of their product if payment is not made – but for others sometimes having a reassurance of the final payment can be a useful tool.
4. Recurring Billing
Sometimes the best way to ensure you are paid on time is to switch to recurring payments in which your clients will set up and make regular payments for your product / service. This can be easily arranged and you can stop work at any time should a payment be missed.
This is an excellent method if you provide a regular service for your clients and it makes it easier for your clients to know exactly what they have to pay and when. The recurring billing can even be setup so that it is done automatically.
There are a number of different options for you to ensure you are getting paid for the work which you have completed. With careful planning you can reduce the number of clients who fail to pay for your products, but also make sure you have clear guidelines in place on how you will respond to those who do not pay on time, to avoid its re-occurrence.
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