Deadbeat clients can result in the death of your business.
                                                     -Dr. Paul J. Pavlik

When you want to eat, either you go to a place where you can order prepared food, or you go to a market where you purchase it for your own preparation. When was the last time you asked the wait person or the check out clerk to “send me the bill.” The restaurant owner or the supermarket manager does not give you the time benefit of sending you an invoice that you pay when you feel like it. In the real world, you know that payments for those purchases or services are due either immediately following your meal or when you purchase the products or receive the services. When you provide your services or products to your clients, however, do you allow them the opportunity to delay payment to you? It is not uncommon for thirty days, sixty days, or even ninety days to go by after you submitted your invoice before you are paid. Even worse, sometimes you get no payment at all.

Our nation is becoming one of late payers (that is why credit card use has become the norm). Heavy debts force many individuals and businesses to pay some bills one month while others are held over to the next. Most individuals believe that they should pay their non-elective debts first (e.g., electricity, phone service, heat, etc. can be shut off, homes can be foreclosed on, and credit ratings can be compromised), They also know that they can often forestall the payments due to smaller businesses, for example, their medical and dental bills, etc.
 
If you are a small business owner, what can you do to assure timely payment so that you, in turn, can pay your own debts on time? How can you speed up the payment process? Here are some strategies on invoicing and collection procedures that will help you get what you deserve--your payment.

Do It Right From The Start

1. Sign a contract. Are you one of those owners who are so happy to get the work that you do not want to jeopardize things by being too "demanding" of new clients? Do your new clients use tactics such as “You can trust me,” “My word is my bond,” “My hand shake is as good as any written contract,” “Friends don’t need signed agreements,” etc. and ad nauseum. Get a signed contract. Make sure it outlines the project and includes a provision of when you will be paid. If the agreed-upon date passes, call your client and diplomatically point out that the due date for payment has come and gone. If you are unable to reach that person by phone, send your response via Registered Mail – Return Receipt Requested. In addition, do not be afraid to ask for an overnight delivery of the check owed you.
 
2. Shorten your billing cycles. While most vendors take 30 to 60-plus days to pay up, there is no reason why you cannot add a line into your invoice that reads "Payment due within 14 days” (including the specific date) or “Payment due no later than …” or “Payment due upon receipt.” That way, you have reason to call your client sooner rather than later to check on a payment. Once a client hears you say the payment is late, that is usually enough to get your check processed.
 
3. Rethink your invoices. While all invoices should include the client's name, the order number, and the date the bill is due, do not stop there. Always list the project that you worked on and, if appropriate to the job description, the amount of time spent on the project. Indicate urgency by adding a comment that a five or ten percent penalty will be assessed for late payments.
 
4. Get money upfront. Try getting at least half of the fee paid upfront before you start the project. Asking for an advance may seem inappropriate, but remember, as a small business owner you are typically operating with very tight margins. Chances are, you will receive payment if you ask for it.

When All Else Fails

Remember, getting paid is how you pay your own bills. When you provide a service or a product to a client, the amount you charge is now your money, not the client’s, and you have a right to it. Never be afraid to fight aggressively for what is yours.

1. Hire a collection agency. Once you hire a bill collector, the chances are remote that you will ever work with the client in question again. Then again, if your client's payment is seriously late (90 days or more), why would you want to continue providing services? Collection agencies will garner anywhere from ten to fifty percent of the payment fee, but at least you will not go home empty-handed. The real benefit is to you and others with future clients of questionable payment reputations – the Better Business Bureau tracks late payments through collection agencies and documents them. Therefore, your diligence may help protect others away from a deadbeat client.

2. Consider small claims court. This should be the last resort. For $25, you can take your deadbeat client to small claims court. Payments in question are usually less than $15,000 (check out the limit of what you can sue for via small claims courts in your state). You do not need a lawyer, the hearings are not complicated, and you will have justice on your side. Check the Yellow Pages under "local government" for help.

Measuring Success

For a sample of how Tracker’s unique operational management and forecasting tools can help your business prepare for a successful financial future, call us at (719) 592-0878 or send an e-mail to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it . Feel free to forward this Tracker Tips e-newsletter to friends, family, or business acquaintances. We welcome anyone to our mailing list, so invite colleagues to send their e-mail addresses to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it .

Thanks to the valuable ideas of Brian O'Connell. He is a Framingham, Massachusetts-based freelance business writer. Mr. O’Connell has written several books, including B2B.com (Bob Adams Media), Generation E: How Young Entrepreneurs are Changing the Corporate Landscape (Entrepreneur Press), and The 401(k) Millionaire (Random House/Villard).

The opinions expressed in Tracker Tips E-Newsletters are those of the author. All of the information contained herein is intended to be general in nature without regard to specific types of businesses, geographical areas, or other circumstances, and should only be considered after consulting an appropriate expert, such as an attorney or accountant.