Tips for Getting Paid on Time

One of the most important factors of owning a small business is often the most overlooked: that of collecting payment from your customers. For those with companies that require payment up-front this may not be a big issue, but a growing number of small businesses tend to adopt a "Bill Me Later" stance that can easily come back to haunt them. Here are a few tips to help you avoid such a trap in the future:

First, be sure to clearly state your payment structure from the moment the transaction takes place. No matter what the method is of closing the deal in your company, eventually you and the client will come to an agreed price. If you state your terms clearly on your invoice, contract or whatever you use, you have a good point of reference if any future dispute comes up.

Allow credit card payments if possible. In today's digital age it's almost a requirement for professional businesses to take electronic payment. Do some research to find the right merchant account for you and get started as soon as possible.

Always try to get a certain percentage of your payment up front, with a payment plan set in place throughout the project. Most business owners will split it evenly into quarters (25 percent up front, with three remaining installments) or thirds; you may find a different plan works for you. The last payment should be the day the project reaches completion. Be certain that the client understands these terms, or you may find yourself chasing after them to receive the remainder of your fee.

Also make certain the payment terms are clearly delineated before you even finish the project. Leave just enough unfinished that the client understands they'll need to pay you before they can receive the completed product. It may sound harsh, and it's true that many business owners feel it's a heavy-handed tactic. But the bottom line is that you do, in fact, run a business, and you deserve to be paid for your hard work. You also don't have to be mean about it; a simple, friendly reminder before the project reaches completion is usually enough to remind the customer of their obligation while maintaining a good relationship.

Finally, you need to stick to your payment policy regardless of the client's relationship to you. It's very tempting to give a friend a break, but you're devaluing your own work that way and basically telling your friend it's okay to take advantage of you. And if they do try to take advantage by not paying on time or otherwise testing the payment policy, you need to follow through like you would with any customer. There's an old addage regarding mixing friends with business, but in the end you should realize that a real friend would recognize your hard work and reward that by respecting your policy.