The Pursuit of Payment: The Secret to Getting Clients to Pay On Time

For any small business, payment from clients and customers is the life-blood for keeping an organization alive. Without a doubt, one of the biggest challenges that small businesses face in this economy is getting paid on time.

What many small businesses don’t realize that getting clients to pay on time is an art form -- taking a certain amount of finesse, tenacity and friendship building.

Following is the secret sauce that I use to get clients to pay on time.

Tip #1 – Have your “finance person” follow-up on all payment matters. If you are the person doing work for a client/customer, it helps that you are not the one following up on payment related matters. This creates a layer between you (the client service person wishing to keep and grow the account) and the need for payment. If do not have someone, find someone (your wife/husband/”accountant" just might do the trick).

Tip #2 – Send invoices out in advance. If the work is going to be performed and billed on a certain completion date, send the invoice out in advanced of that date with the expected completion date on the invoice. The goal is to get the invoice into the accounting system as quickly as possible, even if the invoice date is in the future.

Tip #3 – Send regular statements (via email and in hard copy). On a monthly basis (at a minimum), revisit your Accounts Receivable listing and create a process of sending statements to clients who have not paid.

Tip #4 – Be friendly, appeal to the “human side” and befriend the Accounts Payable person. In the beginning of the pursuit of payment, the old adage “you get more flies with honey” is extremely true. The goal is to become friends with the Accounts Payable person and make every correspondence upbeat and friendly. Make sure to thank the person for any effort but be sure to ask for specific expected payment dates.

Tip #5 – Talk to others in the organization. If the Accounting person is not paying the bills, the chances are great there is a reason (these people are usually agnostic with respect to who is getting paid). Make sure to talk to your client/customer liaison as soon as possible and ask for reasons why the bills are not being paid.

Tip #6 – Stay away from lawsuits. In my early years of playing this game, I was keen to involve a collection lawyer early in the process. I have found that it is much easier to appeal to a person’s sense of doing the right thing then threaten a lawsuit. If the client is now a former client and simply does not return calls, etc., engage a lawyer to write a threatening letter and do the minimum at first on an hourly basis and not on a contingency basis (which is usually a third on the balance).