Coming out of recession, cashflow remains important. We need more to keep servicing demand, buying stock etc but also we want to invest to take advantage of the opportunities opening up.
We also happen to think it is an important part of maintaining excellent customer relations. Nothing turns a good client relationship sour faster than a dispute over money.
With this in mind we give our top tips for getting paid:
1. Review your Terms and Conditions. It is surprising how often we miss the basics. Do customers know what is expected from them in advance? Could you agree payments in advance? Make sure that your Terms and Conditions are clear about when and how you will get paid. Make sure that they are fair to your customer but also to yourself, this might include late payment fees or – to reverse the experience for clients – an ‘early payment discount’.
2. Get paid on the spot. Often the moment that a project is finished is the best moment to take payment. The customer is experiencing the value you have provided them and very often you are with them. There are a number of mobile card payment machines on the market. Whilst all of them incur charges, we should consider the cost of the alternative which is time chasing payment, the cost of borrowing, missed opportunities and the breakdown in relationship that can come from chasing people for money.
Explore the benefits with this article from the Guardian. Market leaders include Paypal, Streamline, 123Send but new providers are arriving almost monthly and it is worth shopping around for the best deal. Companeo offer a price and service comparison site.
3. The new generation of Direct Debit. Direct Debit has always been an attractive option to business but the paper mandates can be costly and administratively burdensome. Cloud computing has thrown up a new generation of service providers that deliver incredibly affordable and easy to use solutions. GoCardless and Directli are market leaders but we expect more to follow. This is especially attractive for businesses that agree a payment plan upfront with their customers. With these new facilities we are able to set up the plan in advance of starting work. If our customer declines to sign up for the plan or agree the mandate, we are forewarned that they may not be serious about paying.
4. Invoice Factoring. Some of us are in business with clients where the relationship is so unequal that we have little or no control over our Terms and Conditions. For example if as a small business you offer services to a large corporation it is not uncommon for them to impose 60 day terms to payments, labyrinthine purchase order processes and impenetrable accounts departments. The silver lining is that these are generally blue chip companies and usually attractive to invoice factoring providers. For those not familiar with Invoice Factoring, this is a process whereby your debt is collected by a third party who give you money in advance minus their fee. For those using Xero, a new add-on Market Invoice was recently announced providing this service as an integration with your Xero Sales ledger. Make sure you build the cost of their unfavourable terms into your price and let someone else deal with the hassle of getting paid.
5. As a last resort, the Small Claims Courts. The real influence of the Small Claims Court is not so much the powers of the court itself but the effect on a business or individual’s credit rating. At a time when your clients may want to remortgage and businesses seeking finance, the threat of damaging their credit rating, is often enough to prompt payment.