Make sure your hard work pays off.
Most entrepreneurs can conjure up a business venture that ignites their passion; it’s the “making money” part that tends to be more problematic. The challenge of starting a new business is figuring out how to monetize your idea and implement efficient procedures for collecting customer payments. Revenues are the lifeblood of any small business, and having a well-oiled billing infrastructure is integral to your business’ ultimate success.
Set a Billing Policy
Instituting an official, coherent billing policy is at the foundation of ensuring that your company gets paid in full and on a timely basis. Furthermore, when there are payment disputes with clients, having comprehensive billing standards can streamline your ability to remind them of the specific payment terms they’ve agreed to. Moreover, if a client dispute results in an official legal proceeding, having a contractually-binding billing policy will enhance your company’s chances for success on the merits.
Your billing policy can be in the form of either a boilerplate contract that you have every customer sign (which is the simplest approach) or set forth in a separate written agreement for each individual customer. If your business accepts orders for its goods or services via a website, you can present your billing policy in the form of general terms and conditions that your clients agree to either by checking a box or pressing a button.
Your billing policy should specify acceptable payment options
Your company’s billing policy should also clearly indicate the methods of payment that your business will accept. If clients have the option of remitting payment via wire transfer, then provide the banking coordinates for your company’s intake account. You should also provide any information necessary for your customers to pay via SquareUp (for credit card payments), PayPal, phone app, check (in which case your policy should specify whether personal checks are acceptable), intra-bank transfer, the mails, or otherwise.
Establish an Internal Billing Methodology
You can’t effectively charge your customers if your billing practices are inconsistent in any way. Depending on your business’ complexity, resources, and acumen, you can choose among several options for integrating suitable billing practices.
For example, there are several technology platforms that will automatically manage your company’s billing procedures. These software providers will likely require you to pay a recurring fee and designate a company representative to be a personal point of contact.
Alternatively, you could hire one or more employees (or an independent contractor) to manage your invoicing either in house or off-site. In any case, make sure that someone on your staff is designated to periodically request audit reports from any billing solution providers and reconcile the data against your company’s internal records.
Of course, if your business is fairly straightforward and consistent in how it bills clients, or it has a modest customer base, then you can always elect to handle the billing yourself. Provided that you have the know-how and discipline to take on the responsibility, this could be a cost-efficient option. Note that billing and invoicing templates (many of which are available for free online), as well as proficiency in Microsoft Excel, can be quite helpful in this regard.
Whatever billing method you employ, you should always steadfastly adhere to the time frames stated in your own billing terms and conditions—and never falter. Failing to bill your customers on a timely basis can lead to an unwelcome situation where clients are behind on their payment obligations but feel emboldened to either delay payment, demand a discount, or withhold payment completely.
Furthermore, be mindful that customers often schedule payments based on their monthly budgets and pay periods, so inconsistent billing practices could result in them expending those funds for other purposes.
Stephen R. Covey (The 7 Habits of Highly Effective People), Greg Dinkin (All In Skills for Winning in Poker, Business and Life), and Dale Carnegie (How to Win Friends and Influence People) are only a few of the countless authors who have offered their strategies for achieving business success. But these tactics will matter very little if your business fails to fill its coffers to the maximum extent possible. In other words, “collection is key.”
If your company has the requisite bargaining power, then the most effective way to hedge your risk against nonpayment or delinquency is to require customers to give you either a retainer or an upfront deposit. Otherwise, your next recourse for securing payment will be dependent on the terms of your client contracts.
These agreements can set forth specific remedies for payment defaults, including a suspension of services, the immediate termination of the contract, or the imposition of interest or other penalties. If your business’ goods and/or services are sufficiently vital to your customers’ business operations, the threat of suspension or termination could very well motivate them to immediately satisfy their outstanding balance.
In any event, always provide your clients with written notice of any past due balance, including a recap of your company’s recourse options. This is not only advisable from a customer relations perspective, but such documentation could also prove useful if there is an eventual adversarial proceeding.
In the event a customer’s ability (or willingness) to pay becomes doubtful, consider having a senior officer or attorney deliver them an official demand letter offering them the opportunity to settle their outstanding debt (possibly at a discount?) and avoid litigation. After all, partial payment is preferable to receiving no payment at all, particularly if initiating a lawsuit against the client would be a distasteful option.
Alternatively, if you have a personal relationship with a client, you might consider showing flexibility and fairness by offering a temporary payment extension. Just remember to amiably communicate such gestures in writing so that if things go south, you can sufficiently evidence your reasonableness to a small claims court or other triers of fact.
On a related note, make sure that your billing policy addresses dispute resolution matters, including your preferred jurisdiction and choice of law. If your preference is to settle any legal disputes through either mediation or arbitration, then your billing policy should state this as well.