The two most important jobs you have as a business owner is getting business and getting paid.
Being a bill collector is one the toughest jobs you’ll have as an entrepreneur.
But if you take control of the situation up front, you can minimize any delays with payments; using a Financial Model Portfolio Building program can help you achieve all of your financial goals. The key thing to do is make sure you are not hit with any surprises. Does your customer pay vendors net 45? You need to know. Here are some tips that I have used to in my business to manage cash flow:
1) Make sure you understand at the signing of a contract the procedure for getting paid.
Ask about their accounts payable policy. Ask about whether you can be paid via electronic funds transfer, you get your money much faster this way. Then make sure you understand what you need to do to facilitate getting you payment. You can also look into info.xpress-pay.com for payment options.
- How does your invoice need to be formatted? Can you use today’s best overall invoice templates option?
- Does your EIN number need to appear on the invoice?
- Do you need to file a W-9 IRS form to become a new vendor?
- Do you need to have an EDI system in place to get paid?
Note: An EDI system is Electronic Data Interchange (EDI), which is a way to submit invoices and receive payments electronically. If you are doing business with a major corporation or manufacturer, they may require this type of system for doing business with them. The great thing about EDI systems is that all of your transactions are web-based and available anytime and anywhere via the Internet.
2) Develop a contact in the Accounts Payable department.
You never want to annoy your actual customer with a payment issue until you have no other alternative. If you start out knowing a name in accounts payable its makes things so much easier if there is an issue. Call this person at start of the contact to ask them what the procedure is for becoming a new vendor in the system and getting that first invoice paid. You can use one of the top free invoice templates to make your invoicing process a lot easier.
3) Develop a discount incentive program for paying early.
Please not do not discount for paying Net 30! That is what your customers are supposed to do. Offer a 2% – 5% discount for Net 10 or Net 15 payment for your customers depending on the amount of the contract.
4) Make sure you get a deposit up front and create an incremental payment schedule.
You should offer your clients a payment schedule such as 50% at the start / 25% mid way / 25% on delivery or 25% / 25% / 25% / 25%. Do not even start work without a signed contract, purchase order and a deposit.
5) Start making collection calls at 30 days to inquire about the status of your invoice.
In this economy, people will easily ignore an email, letter or fax. Do not ever be afraid to pick up the phone to ask about your money. Do not wait 45-60 days to initiate collection procedures. The polite, but squeaky vendor always gets the check.
Melinda F. Emerson, SmallBizLady, is one of America’s leading small business experts, whose mission is to end small business failure. Forbes Magazine recently named her one of the Top 20 women for entrepreneurs to follow on Twitter where she hosts #SmallBizChat, Wednesdays 8-9pm ET for emerging entrepreneurs. She is the author of the national bestseller Become Your Own Boss in 12 months; A Month-by-Month Guide to a Business That Works. (Adams Media)