18/08/2014

By Karen Melonie Gould, Founder and Chief Executive Officer, Gateway2Enterprise

Small business owners, directors and entrepreneurs may be very good at providing products and services to their clients but one thing that many fall short on is getting paid on time.

In some respects, this is perfectly understandable — it can be awkward to talk money with a customer, especially if they’re delaying payment or refusing to hand over what is owed. But a business exists to make money, and so a good entrepreneur must be able to handle this area confidently if their company is to survive and grow.

So what can an entrepreneur do to ensure they get paid on time?

First things first, a business needs to carry out rigorous checks on any company that it is considering working with. If a potential new customer steps into the picture, the directors should do some due diligence to confirm that it is actually trading as advertised. Does their phone number and email address check out? And does the company’s address exist, either in person or if they’re based further afield on web-based tools like Google Street View?

The next step is to obtain a credit report for the potential customer. This offers an invaluable insight into the client’s credit status and trading history, as well as shedding light on its ability and willingness to pay bills on time and even its future capacity to trade.

Beyond these formal checks, the value of sounding out the wider business community should not be underestimated. Company directors should talk to their personal and professional contacts to find out if anyone else has had dealings with the same customer in the past. Failing that, a quick search on business forums and media sites can often flag up previous and unresolved issues in a matter of seconds.

So let’s say you’ve agreed to work with a customer and now you’re looking to get paid.

It’s crucial to issue invoices as soon as possible, especially if it’s the first time the client has been invoiced. Double-check all the basic details such as which person or department it should be sent to, whether the address is correct, what credit terms have been agreed and so on. Then send the invoice, preferably by email because this method is cheaper, quicker, more reliable and generally more effective thanks to the paper trail it leaves.

Not heard back from the client yet? Don’t leave it more than a week to follow up an outstanding invoice by contacting the person responsible for payment, if only to ensure that it has been received, and the credit terms and the amount due are as expected.

Send an email initially, but follow this up with a phone call within 24 hours if that fails to elicit a response — you may even need to doorstep the business if all other efforts to contact them are unsuccessful. When contact is made, record the names of the people spoken to and everything that was agreed. It may be that a payment plan needs to be negotiated, with for example payments staggered over an extended period of time, but this should always be confirmed in writing to strengthen your hand, in case legal action is subsequently required.

Once the initial payment has come through, though, do not make the mistake of assuming there is nothing more to do.

Be sure to review the payment performance and credit rating of customers over time. It may be necessary to reduce the level of credit given to clients in trouble, or conversely extend credit to those on an upward curve.

Last but not least, try to build up a rapport with the person responsible for making payments. A thank you card and a bottle of wine at Christmas will go a long way to ensuring your payments come through in a timely fashion over the coming year.

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