I have been an entrepreneur since 2000, starting my first business when I was still in college and very green to many ways of the world. I grew up with self-employed parents who mostly worked sales jobs on commission. I often wish I had picked up more of the skills my father has for selling snow to Eskimos, but perhaps I’m just a late bloomer and that talent is still just waiting to be developed. π
At some point in the career and life of every entrepreneur, you realize that some people are just out there to make your life more difficult and/or screw you over. They say a sucker is born every day, and there are many people who seek those suckers out — and if you happen to get caught in the fray, well too bad for you, I guess. I’ve even had it happen to me. And no matter how good you think your contract is, if you don’t have all the information you need in the end, you might as well just forget about ever seeing any money.
But when it comes to your bottom line and actually collecting money for the work you’ve done, small businesses are highly at risk, especially since they often depend on that money coming in to keep their business running. Although you could try to screen every company you work with and look up the financial background information about US and UK companies to help give you peace of mind that they will pay — it’s actually still not a sure bet that your invoices will be paid on time. But that doesn’t mean you have to give up all hope. In fact, here are a few things I’ve learned to help make sure all the invoices you send out get paid on time…every time.
Ways to Make Sure You Get Paid
- Obtain the full details of the client you are working with. You’ll need the full business name, an idea of what sort of entity it is (sole proprietorship, corporation, LLC, etc), the full name of the business contact and his or her role in the company, a full mailing address, as well as a physical address. The EIN or identifications number of the business is also wise to obtain. All of this will be essential for creating a solid contract that can be enforced by courts, if need be.
- Always have a contract. No matter who the client is or what the job entails, ALWAYS use a contract. In fact, if it’s a friend or someone you know well, you should be even more vigilant about creating a contract, since they are (unfortunately) often the first people who will delay payment if they are running short one month. Your contract should include thorough details of the work completed, full details of how payment can be submitted, and the payment schedule. If it’s fitting to your business, use contracts that have clear wording so everyone understands what is being said and is clear of what it is you are going to do doing for them. The contract should build trust on both sides of “the table.” Deadlines should be very clear throughout your project, and both you and your client need to uphold them.
- Ask for a deposit. Some small business owners, like contractors who have to buy materials up front, should ask for a deposit before ANY work is started to cover their initial investments for materials. But many other businesses seem to feel this is a bit more difficult to arrange, especially if you’re offering services instead of tangible items. On the other hand, it gives both you and the client an assurance that the work is starting, and with a good contract in place both of you should feel comfortable with these terms.
- Submit a thorough invoice as soon as work is completed. Your invoice should include itemized details of the work you have completed. This way it’s clear to the client what work has been done and what the full costs are. If you include discounts, list them as well. Don’t wait for a few weeks to send an invoice because you may forget and it can also create confusion with the client. Whenever possible, send invoices for parts of projects which have already been completed instead of sending a huge bill to your client after several weeks or months go by.
- Follow up. Don’t be afraid to send a late payment reminder and let them know that legal action will be taken. In many cases, a bill has simply gone overlooked, so don’t jump to conclusions. But let the client know that you will do what is necessary to get your money.
- Know your legal rights. You probably don’t need a lawyer on retainer, but you should know the name of a good one to contact when needed. Familiarize yourself with the statutory limits which apply in your jurisdiction and where/how you will need to pursue non-payment claims (i.e. in small claims court) or if you should work with a collection agency or mediator.
Have you ever been stiffed by a client? How did you handle things? What did you learn from the experience?
Excellent ideas, thank you for sharing!
Thanks Crystal! Hope they help make your business a success! π
That’s why we like being in an industry where everything is cash in advance. π
Definitely a nice perk to your biz! Of course there is a bit of up front investment — but naturally most of the time, people are lining up at the door to get served. π