Whether you are working in the creative industry or you have your own gadget store, it’s not easy to avoid the “elephant in the room”. There are multiple mistakes even experienced entrepreneurs make while setting up their business practices and culture, which makes it harder for them to recover payments from their clients. For an entrepreneur, the payment made from their client’s end is their lifeblood. Negligence of clients can even halt the business itself, especially at an initial level, as the company’s future bills are funded by client payments. The internet has grown so far that people are using multiple methods to approach their clients globally. However, not keeping a secure payment method has caught our attention regarding the missed or late payments from the clients’ end. Although, the clients, especially those who are using the internet as their only source of communication, are skeptical regarding paying in advance. Therefore, expecting them to pay a complete upfront payment is not possible at an initial level when you have just started your business. At times, clients make unnecessary delays or deductions after the delivery of their desired product or services which is accounted for as a bad debt account for entrepreneurs.
If you are struggling with this issue, here are a few practical bits of advice for you that can help in recovering your stuck money and even help you in avoiding such scenarios.
Tips to Secure your Payments
Choose the Right Client
Your ideal situation is when you only attract paying clients. Evaluate the clients as they are approaching you for your work, as this will make it easier for you to shortlist the clients you actually want to work for and benefit from. Here are few tips from which you can easily choose the right client base.
1. Raise your Worth
Selling a product or offering a service? Keep your rates at or above the market price. Selling services at a price that is too low will make you more approachable to frauds or less ethical clients. However, the people who are satisfied with your quality of work will be willing to pay you the average market price or even a premium price for your quality.
2. Design a Proper Payment Policy in Advance
Once you have a proper payment policy for your product or service, the client will get the idea of your fixed payment policy. This will depict your professional attitude towards your work. Your professional policy should cover all of the aspects of your best practices as it will act as a preventive for fraudulent cases. The policy should include:
- Your invoice duration such as weekly/bi-monthly/monthly or project wise
- Your terms of payments
- Penalties in case of any late payment
- Your detailed rate structure that includes basic per hour rate and monthly rate of that project
- Payment methods that are acceptable to you
- How you will handle late payments
- How your company will recover missed payments from the client
Identify your Clients while they Talk
Don’t waste time after you have invested your work and money on providing the customer’s desired product. Dealing with late or missed payments later is a frustrating experience. Therefore, one should identify the seriousness of their clients before they start to work on their project.
- Avoid bargaining
- Understand the client’s psychology and their potential to understand you
- Get a contract signed, even for smaller payments/projects
- Look for clients through references as this will be a more solid and secure source
Always Maintain your Records
Bookkeeping is a very beneficial and necessary part of an entrepreneurial business. The most successful strategies of keeping your payments secure is recording all of your transactions, bad debts, and accounts receivables in detailed records that can help you later in analyzing how much work you are providing and how much you are owed.
Be Serious about Getting Paid
Sitting and waiting for payments will not solve your problem. You need to personally be proactive in seeking all of your expected payments.
- Contact the clients as soon as the deadline has passed
- Start charging interest on late payments
- Keep nudging the client, even after a month or so
- Send a demand letter to the client’s address
- If you are still unsuccessful, contact a collections agency
Be Ready to do Something
Starting up your own business is not a cup of tea and managing it is a much tougher job. Dealing with your employees as well as your customers is a challenging task in itself. If a client is missing their payments or canceling the payment altogether, you should not wait for the end result. Rather, you should adopt a proactive approach to do something regarding the issue.
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