One of the most insidious aspects of an economic recession can be that when business slows, your clients will try to stretch out the time before making payment. On his Business Brickyard website, entrepreneur Howard Mann offers five ways to get paid faster
Forget regular mail
When you mail an invoice, you lose control over it. You have no idea when it was received or if it was lost in a pile of papers somewhere. Instead, send your invoice by e-mail and ask your customer to confirm receipt. "If you do not hear back in a day or two, follow up!" he adds.
Understand their payment process
You need to make sure you know where your invoice is going from the point at which it leaves your office to when you receive the cheque. When Mr. Mann's company worked with GE, invoices needed two people to sign off on them before being sent to a national payment centre in Florida. If a number was missing on the invoice, it was sent back and the process started again. So find out what needs to be on the invoice - do you need to quote a reference number, for example - and whom you need to call when payment is late. Check if there are ways you can help the client streamline the process, as he did when he developed a summary invoice to look like a worksheet for a client who used to let the individual invoices pile up.
Talk about payment terms up front
We often get so excited when we win a new client that we don't discuss payment terms. If they have a corporate rule up front that payment only comes in 30 or 60 days, you will have to live with that unless you can explain why faster payment helps them by allowing you to provide better service. In bad times, it's difficult to turn down business but be alert to how much slow payment can be costing you. With one client, he found that 30 per cent of potential profit was being siphoned off to pay interest on outstanding balances.
Make the invoice an experience
You work so hard to deliver a great experience to your customer in providing your service, so don't turn invoicing into a pain. "How can you make the delivery of your invoice a memorable event to the recipient? It is a chance to ask for feedback. It is a chance to thank them for their business," he notes.
Have an effective system to follow up. Don't count on a statement of account; if the customer is avoiding paying, that won't matter a whit. Keep track of past-due invoices, and follow up by e-mail and phone. "You made a deal with your client to perform for them and part of that deal is to get paid when agreed. As long as you kept your part of the deal, you should - and must - insist they keep their part. If you want to deal with clients with integrity, then demand it of them and do not be shy about holding them to their word," he concludes.