Debtors - why don't people just pay you the damn money

If you are currently being used as a bank for someone else's business, how does that make you feel?  Available I'm sure.

This can happen when you're too nice, too uncomfortable, too shy or too unsure to ask people who owe you money to pay.  Whatever the answer, you deserve to be paid.  Stop putting it off and stop being a bank - there's currently a royal commission on.  You don't need to be part of that.

When you're a start up, there's so much content online for how to do things.  I thought there would be a common sense guide out there.  There are blogs and some very technical articles about debt collection and recovery.  So given that there's not a lot out there, this is what I use in my business and what I advise clients to do.

Invoicing clients - I always ask who is the direct contact for payment of invoices.  I get their name, email, phone number and address.  You need to make sure that the invoices are going through to the correct person.  I set this up in Xero, add invoices with 7 day payment terms, with reminders automatically issued 7 & 14 days after invoices are due.  If people are still not paying within the payment terms, speak with them, preferably face to face.  It's easier to be rude to a phone than a person.

When taking on new clients with larger fees, we go through what their fee will be and payment terms so that there is no surprise.  Prior to starting work on these jobs, the client pays half up front and then we bill at stages until the work is complete.  I do not start the engagement until payment has been received.  I'm in a service industry so this especially true if you're a product based business and need to purchase goods. 

My question to you if you feel uncomfortable about asking for money up front - is why? 

Sometimes you'll get a feeling from clients, that they'll be a pain.  This is a really good time to assess whether you really want to work with them.  When we start out, we think we need to take on every client that comes our way.  You don't.  Some clients want everything at a discounted rate, or require more time than they're willing to pay for.

The best method I have come across to date dealing with unpaid invoices, was advised by Lisa at EP Plumbing.  She sends a polite text message stating the invoice is due and has not been paid to the payment contact, then emails the invoice directly.  This has increased payments on overdue accounts significantly.

Dealing with larger organisations who ignore payment terms?  Again negotiate payment and receive half up front and bill in stages of completion.

Politeness is key in your interactions with clients, even when you feel otherwise.  If you have any further tips or comments, we'd love to get them shared out there so that everyone can benefit.  Thanks!