Putting someone in charge of managing incoming payments and creating an invoice will help keep money coming in.
Develop an Accounts Receivable Department
Some small business owners are tempted to allow the sales department to also deal with accounts receivable. If your business has the ability to hire the employees, establish a separate accounts receivable department or put someone in charge of collecting payments. This will insure that someone is always aware of what clients have paid and what clients are behind.
Have Clear and Concise Invoices
Your invoices will need to be systematic and dependable. Again, if you are lax in sending invoices consistently, then the client will get the impression that payment is not a high priority. Be sure that your invoices are numbered, that the billing terms and due date are visible and clear, and that they are sent to the correct person. I highly recommend using invoice software, such as Tabs3 or Billing Tracker. Google search “invoicing software” and find the program that best fits your needs.
Provide Incentives for Prompt Payment
Give your clients a reason to pay their invoices as soon as they receive them, whether positive or negative. Some options are:
• Take credit card payments. Often this will give the client the ability to pay their entire invoice at once. Keep in mind, however, that, with each credit card transaction you accept, a percentage of that sale goes to the credit card company. Make sure it is an expense your business can handle.
• Give a discount for payments made promptly. Consider offering, say, a ten percent discount if the client pays their invoice within 15 days.
• Charge interest on overdue accounts. Consider charging your client interest on the unpaid balance if payment is not made within 30 days of invoice. A common interest rate is 18 percent per year, which equates to 1 ½ percent per month. Most invoicing software will calculate interest on an unpaid balance automatically.
What if they still won’t pay?
Working as a legal assistant to collection attorneys for five years, I have some helpful advice to share. The remaining portions of Debt Collection Strategies that Work articles covers what steps you should take when a “deadbeat” client slips past your guard dog tactics.
This article originally published by GreatFX Business Cards, offering free online business card design and eco-friendly color printing.
Always consult with an attorney before pursuing any debt collection strategy. The opinions in this article are not to be taken as official guidance but rather as an informational supplement to your overall debt collection strategy.