As a small business owner or freelancer, offering your service to the public can be both exciting and frightening. The typical concerns of finding customers and being able to deliver a high-quality service that keeps the customers coming back are sure to enter your mind.
Once the word spreads from satisfied customers then you will be flooded with new customers. What once started out as something you offered to only close friends and family now has complete strangers calling to ask about the service. Congratulations, you are now running a successful business!
Eventually, small business owners will provide products or services on credit and customers will fall past due on paying the invoice. Often times this happens because the customer is struggling with finances. Clients will sometimes be unhappy with the finished product provided and will not pay the full amount or refuse to pay any at all.
The possibilities of why a customer refuses to pay the full invoice are endless but knowing how to reduce the chances of this from happening and what to do when customers don’t pay can help a business keep the doors open.
Below we will discuss four important tips to help keep your small business cash flow coming in as planned.
- Invoice quickly & clearly– When a service has been provided, send the invoice over immediately. If a business waits too long to invoice it sends a message to the customer that paying the bill is not urgent. This will lead to customers paying late or attempting to not pay at all. Send the invoice out quickly and have the due date for payment posted clearly on the invoice to avoid any disputes.
- Enforce late fees– If a customer is late with payment, a late fee should be charged. This isn’t optional. When sending the invoice, mention the due date and right after mention the late fee charge for being late with the payment. Make the fee large enough to encourage payment on time. Late fees can bring in extra revenue which is always welcomed but the main goal is to make sure payments are made before the due date.
- Follow Up– After you performed the service, follow up with the customer. This is good customer service and allows you to address any issues that have arisen quickly rather than leaving the customer feeling unvalued. If a customer is unhappy with the service, make it right and do it quickly. If the product wasn’t as expected, offer a replacement. If a customer is unhappy then they can rationalize not paying the bill. By following up, you can make sure the customer was happy which will lead to quick payments in full.
- Use Collection Agency– If a customer has went past due and has not responded to invoices sent in mail and phone call attempts; it may be time to hire a debt collector. Collection agencies will handle all the phone calls and negotiating of payment with no upfront fees charged. Often time small businesses assume how much it will cost to hire a collection agency and never move forward with the process. If they do not get paid, then you owe nothing. This is called a contingency rate which simply means collection agencies get paid only a percentage of what they collect. Investing more money chasing after bad debtors is never a good idea and should never be recommended.
Hopefully, these tips above will help keep the cash flowing into your business and avoid the time and stress involved with chasing after payments which will only slow down the growth of your new business.
Author: Luke McCann operates CollectionAgencyMatch, a website dedicated to helping small businesses find collection agencies to help them get back the money they are owed.