As a small business, getting paid on time is integral to your success and liquidity. Having an efficient billing and management system in place can improve your rate of collecting on invoices both new and outstanding.
Enter into an Agreement
Doing business with a handshake can result in a lot of headaches in the event that things do not go according to plan. And ask anyone who has been in business for a while, things often do not go according to plan! It is best to avoid uncertainty and enter into a written agreement. The agreement should lay out how much you are owed and specify a due date. It is also possible to include language that adds interest in the event of late payment. If the agreement is simple, a form contract will likely meet your needs. If the agreement is more complex, ask your lawyer to draft an agreement that addresses all the details.
There should be one person in your small business who is responsible for billing and pursuing outstanding invoices – perhaps an office manager. It is beneficial to have a designated individual responsible for collections because pursuing collections directly can undermine your existing business relationship. It can also be rather time-consuming.If designating a specific person is not financially feasible, pursue the task yourself. Block out several periods of time in your calendar each week to send invoices and pursue outstanding bills. If you block out time in advance, you are more likely to immediately pursue outstanding invoices and maximize your collections.
Often, bills are not sent contemporaneously when services are rendered. I cannot emphasize the importance of billing as soon as possible, preferably at the same time as services are rendered, and in situations when bills are recurring, be sure to send them at regular intervals and follow up per the terms of the invoice.
Diversify the forms of payment your business accepts. Make sure your business is equipped to take payment via credit or debit card, money orders, checks, and utilize money transfer apps.
Once the invoice due date passes, it is important to follow up on a past due payment in multiple forms: phone calls, letters, emails and re-sending invoices. Start by sending out an email or letter the day after the due date has passed and be sure to include a copy of the original invoice. Follow up with phone calls. Remember to take notes summarizing all phone calls and to keep copies of all correspondence.
Please note that all communications must be professional, respectable and should approach each customer with dignity. Avoid contact that can be construed as harassing. Do not call during early morning or nighttime hours and avoid calling multiple times per day.
Sending out invoices and letters can create an “account stated” which will be useful if you have to take the matter to court in the future. An account stated helps ensure that your customer or client cannot argue that the service or product you provided was defective in some manner.
The last resort is to sue for payment, but many appropriate measures exist to avoid this option. Give LeFebvre Law, PLLC a call to discuss your commercial debt collection issue.