How Do I Get Clients to Pay On Time?

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Business is booming. You’ve got jobs lined up for the next six months and your current jobs are keeping you busy. So busy, you haven’t really had time to pay attention to your billing. That is until you take a deposit for your newest job to your bank and notice your account isn’t as robust as it should be. So, you take a look at your books and realize you have clients from a month, two months, even three or more months ago that still owe you for jobs.

You’re tempted to kick yourself. How did you let this much money go uncollected? And why haven’t they paid you?

The answer to both questions could be the same. Both you and your customers might have been so busy that you forgot to bill and pay. It does happen. But more likely, the customer is waiting for you to ask to be paid. So, here’s how you can do that.

Less than 30 Days

If you finished a job in March, and it’s now April, that’s not really late unless you had specific payment arrangements – for example, if you require all payments to be made within 10 days of completion. If a job is finished March 15th, then any amount outstanding after March 25th is late. Send a reminder memo letting your customers know that they have a past due balance. It could be a letter or just a copy of the original invoice. Your customers who forgot will generally pay you. You could make a phone call if you prefer that, but a paper trail is always a good thing, especially if…

Thirty to Sixty Days Late

You sent a letter to remind them in April. It’s now May and you still haven’t received payment or any communication from the customer. You can now demand payment and charge a late fee. You could have charged the fee initially, but many businesses shy away from escalating collections if possible because the situation can get very messy once that happens. But after 30 days, it’s fair game. So, fire off another letter (or another copy of the original invoice with “Past Due” stamped on it and the late fee applied to the balance. For many, that’ll be enough to make them cough up the dough.

Sixty to Ninety Days Late

At this stage, it’s pretty safe to assume your customer isn’t planning to pay you. You could attempt to find out why, but at this point, it really doesn’t matter, you just want to be paid. It’s time to send a second demand letter, add to the late fee and let them know you’re willing to pursue legal options if payment isn’t made immediately. At this point, you might want to contact your attorney and let them know the situation, or if you don’t already have one, consider getting one. Often, a letter from your attorney will be enough to get a client to pay.

More than Ninety Days Late

Once you get to this point, your options are to take them to court, hire a collection agency or write off the debt. Of course, you can write it off and sell it to a collections agency, but you’ll only get pennies on the dollar. Taking them to court will most likely net you the same result, and you’ll be out of court and attorney fees as well.

How to Avoid the Situation

The best way to avoid being in the situation of chasing clients for payments is to make sure you get a chunk up front. Customers who put down deposits are more likely to follow through with payment because they already have money invested in the project. Also, running credit checks on your customers (especially for the big projects) could alert you to a slow or no pay client.? And always – ALWAYS – have a contract that details everything. So, if the time comes that you need to take them to court, you’ll have a leg to stand on.

Have you ever had to chase down a client payment? How did you handle it and did it work?


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