The Wall Street Journal has an article that is right up my alley, “The Battle Against Slow Payers.”
The article reviews a variety of new online applications and services, such as: automated invoice dunning software; pay-in-advance invoice escrow services; and affordable business information and credit bureau searches.
While I don’t have first-hand experience with any of the vendors mentioned in the article, the collection issues that these services try to prevent are very real, and, even without using these services, small businesses should keep the underlying issues in mind at all times:
Clear, Well-Documented Invoices: Always have invoices that are clear and simple where they need to be (due date, amount owed), but have sufficient detail where necessary (project description, services provided).
Keep Track of Your Unpaid Invoices: Don’t wait until the 90 or 120 day mark to send reminders. By that time, it may be too late: either the customer no longer needs your credit/services, or you’ve fully performed your end of the deal. In collections, the squeaky wheel really does get the grease.
Get Advance Payment Where Possible: If it’s a new relationship, ask for a retainer for all or part of your services. Don’t worry about offending the new business; if it’s a legit company, they’ll understand.
Do Your Homework Before Lending Time or Money: If this economy has taught us anything, it’s that there is no obligation to lend money or sell products to unfamiliar customers. If the customer doesn’t have a track record with you, check out their business history, ask for referrals, or, if no such information exists, sell on a cash basis only. Otherwise, you’re assuming all the risk.
Doing all of the above is time-consuming and sometimes expensive, and, in the end, nothing can guarantee that all your accounts will get paid. But, if a little advance research vets just one or two of the bad apples, then it will all be worth it.
An unpaid invoice plus a collection lawyer costs far more than the services described in the article.