Small businesses need to be paid for their products and services to continue operating and thriving. Most people would not argue with this fact. Unfortunately, it is all too common customers end up deciding to not pay small businesses the money they are owed. This can be highly detrimental by making it challenging for the business to pay bills, cover expenses and continue operating.
Therefore, small businesses should consider strategies for ensuring they are paid for their work. The following are some ways for small businesses to help make sure they are paid.
Have a signed contract
A contract specifies the terms of when and how much the small business will be paid by the customer. Working without a signed contract can leave things ambiguous which can result in confusion and misunderstanding, leading to disputes over payment. Contracts can also protect a business if a customer decides to withhold payment by providing evidence in a small claims lawsuit.
Request retainer or deposit upfront
Another option is to ask customers for an upfront deposit or retainer fee when signing the contract. The upfront deposit is legal proof of a contract being agreed to by both parties. It also may ensures you will at least receive some money for the product or service. The deposit can be used for any costs or expenses related to the project.
Request payment upon delivery
You should know it is completely appropriate to collect payment for your work or products upfront at the time of delivery. Although it may be common for many businesses to deliver the work product before being paid, it is not a requirement to provide this privilege. Perhaps you can extend the privilege of paying after receiving the work product for long-time repeat customers, Being paid first by most customers, especially new clients, is a good long-term business strategy.
Bill clients on regular basis for ongoing services
If your small business provides clients with services that are ongoing, it is a good idea to make sure to send your clients billing on a regular basis. This ensures you do not have too much unpaid work for which you are owed payment. There are many software solutions which can automate the billing process.
Multiple methods of payment
Making it easier for clients to pay you increases the likelihood of you receiving payment in a timely manner. Therefore, make sure you are able to accept multiple payment methods. This could include cash, credit card, debit card, mobile wallets and even checks.
Look out for warning signs
If possible, the best thing to do is to avoid clients who you will have issues with collecting payment in the future. Many times, a customer can provide hints about the potential for nonpayment issues. For example, many problematic clients will show a lack of respect for your time which could become apparent through excessive and constant emails or phone calls throughout the day. Also, another warning sign is if a client is unresponsive to your questions.
Any opinions are those of the author and not necessarily those of Raymond James. This material is being provided for informational purposes only and is not a complete description, nor is it a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or a loss regardless of strategy selected. Prior to making an investment decision, please consult with your financial advisor about your individual situation.