Ways to Make Sure You Get Paid

At some point, every small business owner has worried about whether or not he or she would get paid. Whether it's the couple of customers that have overdue accounts or the customer who seems to be reluctant to pay for the job completed, collecting money can be one of the most trying aspects of running a small business.  Here are some ways to make sure you get paid for the goods and services you sell.

Setting Proactive Policies Are the Key to Help Getting Paid

Determine your payment policy

• Determine upfront the types of payments that your business will accept.  Cash, debit and credit cards are solid terms of payment.  Accepting credit cards is the least risky of the credit options because most of the risk is on the credit card company, however, fees are involved. 
• Accepting personal cheques has some risk and you need to have terms around them. If you give your accountant a cheque when you pick up your tax return, your accountant has extended credit to you because the work was finished before you paid for it.  Any time you don't collect full payment from your customer in cash up front, you've extended credit.

Create a credit policy

• Determine if you are the type of business that has to offer credit to your customers. If the benefits of offering credit, such as increased sales, outweigh the costs of offering it, such as the risks and costs of nonpayment, you should offer it. If not, you shouldn't. Just don't forget that if you extend credit freely and don't get paid, it won't matter how much new business you generate.
• Also, if the norm in your industry is to provide credit, you may have no choice but to offer it. If you own a fast food restaurant, you probably can get away with requiring full payment in cash. But if you're a lawyer, you may lose business if you don't extend credit. An angle you should consider is whether you can gain an advantage over your competition by offering credit where the industry custom is not to offer it.
• Overall, in deciding on a credit policy, you should be guided by the following principle: if you can ask for cash up front and your customers are willing to give it to you, that should be your policy. Extend credit only if business conditions demand it.
• Establish your credit policy including terms and criteria to help assess a customer’s ability to pay (like conducting credit checks and references). Then document your credit policy and customer terms and ensure that all pertinent employees understand them.
• How Much Credit to Offer?  A good rule of thumb is to start with a small amount of credit and make your customers earn their way to higher limits.

Take partial payment in advance

• Worried that you won't get paid for a service that you can’t take back? If it's sensible in terms of the price of the goods or services, ask for a deposit up front. This is an increasingly common business practice for higher-ticket items and services and no reasonable customer should be offended by such a request.
• For example, you might charge a percentage of the bill as a retainer before you start work on a project with the remainder due on completion of the project. Or break the bill into thirds, asking for a third before work starts, a third halfway through the project and a third upon completion.
• The good thing about partial payment is that it ensures that you get paid something even if the customer defaults on the rest of the bill.

Invoice promptly