Getting customers to pay on time is one of the biggest challenges for entrepreneurs as the economic recovery drags on. And when the problem persists too long, it can ultimately shut down your small business.
Dawn Fotopulos, small business consultant and founder of Bestsmallbizhelp.com, addressed this financial headache with business owners at the New York Times Small Business Summit this week in New York. Here are her best five tips for getting paid faster.
1. Send invoices ASAP. It is all too common for business owners to finish their work for a customer and neglect to submit a bill. "You can't believe how slow small business owners are at getting their invoices out," Fotopulos says. "And the truth is the client has no obligation until they receive the invoice."
2. Explain every single charge. Don't send your customer an invoice with only a dollar amount on it. Itemize everything the customer has bought or every service you provided and highlight any discounts given. For example, Fotopulos charges non-profits less for consulting services than she does for-profits. When she sends an invoice to a non-profit, she indicates what it would have cost at the for-profit rate. "When that client signs that check, they are excited to sign that check, they know exactly why they are signing that check and they know how much value they have received," she says.
3. Make deadlines crystal clear. Don't allow the opportunity for any confusion. You need to tell your client when he or she signs the initial contract how much time they have to pay you. Also, reiterate your policy on both the billing invoice and packing slip. "It needs to be there so there is no ambiguity as to when that bill should be paid," Fotopulos says.
4. More invoices for smaller amounts. If possible, you want to avoid hitting your client with one, giant bill. A client is more likely to sit on a bill that is overwhelmingly large. "Make it easier for the client to pay you," Fotopulos says. Also, by getting paid in small, frequent increments, you protect your business from losing a lot of money should your client go belly-up while they are sitting on an unpaid invoice.
5. Make a personal connection. "We spend a lot of time in sales schmoozing the person who signs the purchase order, but absolutely no time getting to know the person who is going to cut the check," says Fotopulos. She suggests sending a handwritten thank-you note on a fairly regular basis. The next time there is a bottleneck in the payment schedule at your client, the accountant will remember you. "When they see your invoice come through, you are not just another vendor," she says.
What do you do to make sure that your business gets paid on time? Leave a comment below and let us know.