A dozen ways to guarantee you'll get paid: try our invoicing advice today! - Tutorial

Home Office Computing, Oct, 1992 by Linda Stern

The first rule of being in business may be this: If you want to get paid, you have to ask. Many newly self-employed people make the mistake of waiting for their clients to pony up, of being too shy to set fees and stick to them, or of not wanting to press potentially valuable clients by reminding them of past-due accounts.

This is counterproductive, as one hapless reader of HOME OFFICE COMPUTING realized when he asked for advice some time ago on how to get paid. "Some of my clients offer to pay, but others take it for granted that I'm doing it for fun," he wrote, sounding as if he were having less fun all the time.

"Ask and you shall receive," probably is an overoptimistic view of invoicing. But if you don't ask, you can wait a very long time before any money starts showing up in your mailbox.

TOUGH BILLING

Here, then, offered in the spirit of assertiveness training, are our 12 best tips for successful billing.

Call it a bill. Ron Thompson, a petroleumengineering and ,energy consultant in Lenexa, Kansas, noticed that his billing statements were falling on deaf desks at his biggest client's accounting department. "They said they wouldn't pay 'statements,' just 'invoices' and 'bills.'" An incredulous Thompson changed the word to invoice and hasn't had a problem collecting from that client since. Your form should carry the title BILL or INVOICE in large letters at the top of the page.

Include your terms. It's typical today for most small businesses to allow 30 days for payments, although "due on receipt" is a popular runner-up. Some small businesses are now putting 10- and 15-day terms on their invoices. Norman Boone, a financial planner in San Francisco who has mainly business clients, usually advises them to make invoices payable on presentation. At the very least, doing so might speed collections.

File 'em fast. The longer you let an invoice languish on your desk or in your computer, the more vague the memory of your services becomes to your client, and the hazier your own recollection of the charges. "If it's a finite project, bill at conclusion, or a day or two later," says Boone. If you are doing a high volume of work for a few clients, you may want to bill every week or every other week. But never go more than two weeks without invoicing--remember, the payment clock doesn't start ticking until your customer opens the envelope.

Follow up firmly. Dave Bennett, a San Diego computer consultant and software writer, subscribes to the "bulldog" school of collections. "I demand payment within 10 days of invoicing, and if they don't pay by then, I tell them I will suspend the account," he says. Of course, if Bennett's clients pay a few days late, he doesn't burn their business cards. But he did drop one client who habitually waited two months to pay his invoices.

Even if you show your clients some leniency, it's a good idea not to go too far down the road with one who owes you money and has never paid you. Says Bennett, "Only about 95 percent of all invoices dated 30 days get paid within that time, and it goes down pretty drastically from there." The worst small-business horror stories often involve consultants or contractors who continued to perform work for questionable clients. These slackers take what they can get before they go out of business themselves or move from contractor to contractor. Refusing to do more work until a late client brings his account up-to-date is a reasonable way to conduct business.

A typical follow-up schedule might involve a friendly phone call at 35 days, and progressively more severe-looking notices at 60 and 90 days. Once your invoice has been in a client's hands for 90 days, you have some assessing to do. Ask yourself, "Is this a client I'd Irke to keep, or is it one that's not worth working for?" If you want to keep the client, try to accommodate her cash-flow problems. If you just want your money, do what you have to--including resorting to collection agents and smallclaims court--to get what's owed you.

Accommodate where you can. Despite Bennett's tough-guy tactics, he makes his 10day terms more palatable to his clients by asking them when they want to receive their monthly invoices. Then he schedules his billing so his clients receive their invoices during the week that's most convenient (or cash-rich) for them.

Offer incentives. Many business owners report that they get paid faster by offering a 5 or 10 percent discount to clients who pay invoices immediately. Offering a 10 percent discount for 10-day payments can really improve your cash flow, and you don't have to spend time or money calling or rebilling the same clients.

Carry a big stick. Jacquelyn Denalii, a writer in Orlando, Florida, uses the opposite approach. On the bottom of every new invoice, she informs her clients that she posts a "monthly rebilling charge" of $15 if their payment is received after 30 days. Does she usually get the late fees? No, but even when she's not paid immediately, she usually gets paid very shortly after she sends the second bill with the $15 charge added.