"The most important thing you can do is establish your terms upfront," she asserts. "Negotiate a pay period that works for you and build it into your agreement or contract."
Typical payment terms vary by business type. For service businesses, it's acceptable to request a percentage of the project fee in advance, while businesses selling a product can opt to ensure prompt payment by shipping the merchandise c.o.d. "When you'll be working on a project over a period of time, it's viable to request periodic payments, such as one-third upfront, another third midway through and the remainder on completion," explains Price.
Adding a financial incentive in the form of a late fee or an early-payment reward can also speed receipts. "Offering a 10 percent discount for payment within 30 days can be effective," says Price. "Or, if it is legal in your state, your invoice terms can call for an interest charge on any fee not settled within 30 days."
A proactive stance also helps. Sending past-due notes and following up with a call when bills go unpaid tends to spur payment--even without the threat of a late fee or collection action. "It's about pride," says Price. "People see that second invoice stamped 'Past Due' and they get out the checkbook."
Jennifer Pellet is a freelance writer specializing in business and finance.
For reprints and licensing questions, click here.