Getting paid

by Admin
Updated: August 17, 2020

Getting paid is about as fundamental as it gets when it comes to personal or business success

Getting paid is good. Getting paid on time is better.

Possible reasons why you might not get paid on time or at all:

  1. Misunderstandings - your fault
  2. Unexpected inability to pay - it happens
  3. Dissatisfaction - your fault?
  4. Deliberate intention - bad/non customer

Don’t give credit if you don’t have to

Getting paid at time of sale, or in advance is the best way to avoid problems of late/non payment.

Get as much as possible in advance. As a guide, try to get at least the amount of your direct costs as a deposit. Don’t be afraid to ask.

Be prepared

Make it as easy/likely as possible for the customer to pay.

  1. Credit/reputation/history check
  2. Get stage payments
  3. Have a written agreement
  4. Invoice on time & follow up
  5. Manage accounts receivable

Credit/reputation/history check

Established businesses will have one or more bureau accounts they can use. Even then, it’s not always feasible or worthwhile to credit check every potential customer. It becomes more important as the contract value increases.

Note that some companies have a good rating but still pay late.

At the very least, small & large businesses alike should do an Internet search for the customer name.

Get stage payments

Arrange sensible stage payments if appropriate. At least monthly.

Escrow can be used to protect both parties.

If you’ve been paid in advance, it’s good discipline to not spend the money until the customer confirms satisfaction, i.e. create an internal escrow.

Have a written agreement

This is for everyone’s peace of mind. It is not a question of trust, it is so that no-one has to worry about remembering what was said.

Contracts should first & foremost be clear. They should state exactly what is being supplied and exactly how it will be paid for.

Exhaustive legal clauses aren’t always appropriate. Correspondence may amount to a valid contract. All contracts can be challenged. Overly detailed contracts can be challenged on the basis that they contain more detail than could reasonably have been processed by the customer at signing.

Double-check any prerequisites (tax forms, licenses, insurances etc.) that might delay or prevent payment.

Always specify the payment method. This is especially important when working with foreign companies (at the very least, be clear whether payment is to be made in your currency or theirs).

Invoice on time

When the work is done, the customer expects to be billed. Anything else can cause unnecessary problems. It’s amazing how many small business bill late.

Assuming the payment terms were in the written agreement, it’s essential to bill on time. Otherwise, you could find yourself violating your own agreement.

Missing or late invoices can cause accounting problems and really mess up project tracking.

Include clear payment instructions on every invoice & statement.

Manage accounts receivable

Don’t send & forget. Always confirm your invoices have been received and nothing is wrong with them.

Maintain a dialogue and keep notes.

You should know exactly when & how payment will be made and if it doesn’t arrive as expected you call attention to it without delay.

More info

“Habits of Business Owners Who Get Paid on Time” at inc.com.

“How to Check a Company’s Credit Report” at wikihow.com.

“What Is Escrow?” at thebalance.com.

“Accounts receivable aging report” at accountingtools.com.

Internal links

Cash flow Project planning Just in time supply Buying a business Go to Articles
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