Written by Andrea Henry
Let’s start off by admiting that as much as we love what we do, as small business owners, we do this to make money.
Let’s also admit that we have clients who have not really grasped this concept and who just don’t pay us on time — or at all.
How do you deal with it? As always, prevention is better than the cure. Here are my top three tips to getting paid on time.
Get it in writing.
Relying on verbal agreements and handshakes is for amateurs, and you my friend, are a professional with bills to pay. State your fees and payment terms in writing so that you avoid misunderstandings about payment expectations. Your written contract should also include, at a minimum:
- a Scope of Work Clause which is a very clear, very specific description of exactly what you are going to provide to the client.
- a Cancellation Clause which will tell your client if and when they can cancel and what, if anything, they will still owe you after cancellation.
Make it super convenient and easy to pay you.
In your intial meetings, ask the client what works best for them in terms of timing of invoices, credit terms and payment type. Instead of just accepting cash and cheque, consider accepting credit and debit cards, online payments, direct deposits and email transfers. Paypal, Square, Quickbooks and Freshbooks are just a few companies which allow you to send invoices that clients can pay with just a few clicks.
You remain in control of the decision but by involving the client in the process and by being flexible in reponse to her needs, you make it more likley that the client will pay you on time.
Create a structured, well-thought-out procedure for collections.
Even with the most rock-solid contract and convenient invoicing systems, you’ll still occasionally have to deal with a client who doesn’t pay on time. When creating your collections system, think about:
- How often you will remind your client to pay the invoice e.g every week, every month, every quarter, and for how long will you send those reminders.
- Whether to add interest to the outstanding amount after a certain number of days have passed (Pro Tip: you should add interest because it acts as a deterrent to long delays in payment)
- What escalation methods you will use if the client still doesn’t pay, e.g send the matter to a collections agency, retain a business lawyer, or take the client to small claims court
- How important the client is to you; using a collection agency or starting a court action often leads to a permanent breakdown in the relationship.
The first time you ask a client to sign a contract or you send out a collections letter may be nervewracking. But remember, whether or not you are new to entrepreneurship, you definitely are not new to the service or product you are providing. By insisting on a signed agreement and a collections policy that protects your ability to get paid, you signal to the world that you take your business seriously. When you take yourself seriously, guess what? Your clients take you seriously — and serious people get paid.
Andrea Henry is an Elite+ Mompreneur member, and partner at Vox Law LLP, The Law Firm Built With Love for Small Business™. Sign up to receive legal tips not shared anywhere else, and a must-have checklist for Canadian small businesses at The Secure Startup.
This article is made available by Andrea Henry of Vox Law LLP for educational purposes only and not to provide specific legal advice. By reading this article you acknowledge that there is no solicitor-client relationship between you and Andrea Henry and/or Vox Law LLP. The article should not be used as a substitute for competent legal advice from a licensed lawyer.