Practical Legal Tips - 5 Tips For Making Sure That You Get Paid for Your Services or Products

Do you want to work for free?  Of course not.  Yet, many business owners continue practices that do not ensure that they get paid for providing their service or product.

 Then, they are left to spend valuable time and money chasing down payments from their clients.  How do prevent this scenario in your business?

1.  Get your money up front.  Get paid before you ship your product or provide your service.  The best plan is to get paid in full before anything on your part happens.  That way, you know if there is no money, you haven’t spent any time or money on someone who won’t or can’t pay.  Even if everyone in your industry provides their service or product first and then looks for payment, you can be different.  You can add on something extra, or raise your prices and provide a discount for full payment in advance.

2. Reject business from unreliable customers.  This recommendation is difficult for business owners who worry about not getting enough business in the door.  It seems counter-intuitive not to accept every order that comes in but if you think or your gut tells you that you may not get paid for your work, just say no.  You can get more information about the customer’s creditworthiness from the client by asking questions, listening to the answers, or by requesting financial information.  You can also get information from independent credit bureaus.  If the customer sounds as if he will stiff you if he’s not 110% satisfied or he is late paying most of his suppliers, walk away from this business.  There’s a good chance you will never get paid.

3. Get all of the payment terms in writing.  If you don’t feel that you can afford to get full payment in advance, get an agreement in writing as to the very specific terms under which you will sell your product or provide your service first and then get payment.  You can provide for partial payments up front or ship ½ and get paid ½ before the balance of the shipment goes out.  Or for services to be paid for at certain defined benchmarks or you will not provide the balance of the services needed.  Be very detailed about your term so there are no misunderstandings.

4. Provide paper.  Always send out invoices to any client who has not paid in full in advance.  These provide reminders to clients that payment is due.  It is also a trigger for any accounts payable staff that they need to cut you a check as the terms in an agreement are very fuzzy reminders that a payment is due on an actual date.

5. Be proactive with reminders.  If the terms of payment are not met, don’t assume your customers will eventually get around to paying you.  Be the squeaky wheel and remind your customers that you haven’t received your payment as they agreed to.  Keep on a regular schedule of reminders, both in writing and by telephone until you get paid.  If you speak to your customers about their late payment (assuming they will take your call), get a commitment as to when they will send a check.

It’s very difficult to run against the tide of giving easy credit to our customers and hoping they will pay as they promised, but there are too many businesses on the edge of bankruptcy to take someone’s word that he will pay you as promised.  Get as much up front as you can and get the terms in writing.  This will help you keep your accounts receivable to a small number.

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