Hi Fellow Business Owners,
In the last couple of the weeks, I have been speaking to local Bookkeepers, and other business owners in the local area, about the difficulties in getting clients to pay for their services and how this can be improved.
I was shocked to hear a bookkeeper who had one of their clients owing them money and not paying invoices for a couple of months, and there are other Business owners who have the same issues, and after talking to the respective Business owners, find out one of the reasons why people owe them money, is because they are too kind to say no to keep doing the work until they are paid.
Every small business owner works hard to complete a sale and therefore find clients, and therefore can be satisfied when they have 20+ clients on their books at any one time, especially in the service industry, and yes to have 20 clients on the books is great, and can ensure we are all busy and ensure we have a regular income, therefore, regular cash flow coming in, which is what keeps any business afloat.
A client who owes you $3000 for a service, which has accumulated over a couple of months, may look good on your books and has kept you busy, however they are not really a paying client if they are not paying, and therefore become a time consumer for your business.
A good paying client is one who is paying you for doing their work and ensuring you have a regular cash flow if they are not paying for your services they are not a paying client.
Tips to prevent this from occurring,
Have a well-written terms and conditions contract for clients who agree to use your services, ensure it is well documented, on how long someone has to pay the invoice from the time you issue the invoice, e.g. 7 days, 14 days, 30 days etc, also ensure you mention the penalties for not complying with the terms of conditions.
Ensuring you invoice your clients regularly, and as soon as you complete the particular agreed task/project, or if they are on a monthly invoice, ensure you invoice at the agreed time, end of the month, mid-month etc, the sooner you invoice the sooner you receive payment.
Ensure you frequently check your bank statements to ensure you know when people have paid or not paid, and ensure your account program is kept up to date as often as possible.
If you notice someone has not paid by the agreed time, contact them as soon as possible and find out what the problem is, e.g. why have they not paid the outstanding invoice number, and when do they expect to pay for it.
If the invoice is outstanding way over the time you allow for payment under your terms and conditions, think about how do you cancel the service, until full payment is paid, or they have started paying off to a level that you are happy with before returning back to being their service provider.
Remember one important thing, if a client is not paying for your services or products as you allow accounts, then they are not really a paying client and therefore become a liability to your Business, that you may never see the money again, and may take up your valuable time which you can be used with another paying client who actually pays on time and able to assist your consistent cash flow for your business.