How to Create an Iron-Clad Payment Schedule With New Clients

How to Create an Iron-Clad Payment Schedule With New Clients

Not surprisingly “getting paid” is one of the most worrisome parts of doing business. And the problem doesn’t just present itself when working with big corporations who like to hang on to every last interest-bearing dollar until the last minute possible (ie., 30 day receivables, 60 day payables, and all the legally-binding fine print that goes along with these practices). Small businesses need to play the game in order to effectively leverage their dollars too; especially startups.

But you’re an entrepreneur, right? If you wanted guarantees, you’d grab a job working as a laborer, or score a gig working as a barista at your local Starbucks franchise.

Getting paid, on time, is the kind of thing that might seem hopeless without a legion of devoted collection representatives staked out in the basement of your business, chasing the dead weight and sending daily reminders to all the scuttlebutts using every trick in the book to keep you separated from what’s owed to your business.

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Image Credit: Steve Jurvetson/Flickr

Here’s a few ways to ensure you start out each new client relationship the right way. A step-by-step checklist of how to iron out the details, before that first payment is due:

1. Do they pay their bills?

I’ll bet this one seems perfectly obvious to most of you, but consider for a second just how few businesses actually perform this bit of due-diligence. Sure, you can still get bit in the keyster after checking up on them. Sometimes, you don’t find out about the financial-degenerates until they claim bankruptcy. It’s just how it goes. Still, you can put your feelers out, talk to some industry folks, Google the crap out of them, and see what’s revealed in the end. If you do this step, the rest of the tips may never even apply to your situation.

2. Actually take time to iron out a payment schedule in advance

If this is your first time running a business, you’re a prime target for the more experienced who know a lot about employing stall tactics you’ve never even imagined before. Missing invoice numbers, unclear product/service descriptions in the billing section, poor grammar, and others. Don’t fall victim to these and other tactics just because you’re desperate to fill more orders and get more testimonials. Make your terms crystal clear and put those terms in the contract.

3. Get a business accountant

The good ones will work with you to make a no-BS contract that’s legally binding. If you’re lucky enough to have a dynamo on your payroll, they can coordinate with you and your clients, so said clients know that you’re not some ho-hum from the bayous of Florida who can’t read. Accountants are indispensable. They know what you can do and can’t to get paid.

4. Find out every piece of data and documents they need in order to pay you

You’d think that all good businesses would make this information crystal clear from the outset. Unfortunately (for you) there are two major reasons why clients tend to leave this out of the initial negotiations:

  1. They don’t plan more than one day into the future and generally just don’t have their house in order at all.
  2. They know they can use it to delay payments and keep that cash free for other purposes while you’re inevitably forced to do the same with your payables because they won’t let go of your cash.

Do they need a W-9 before putting your invoice into the queue? Do you need a purchase order #? Perhaps they only pay invoices printed on pretty purple paper? Make sure you know and tailor your contract with them to reflect these expectations. That way, there’s no room for excuses later.

5. Get a clear answer on WHO will pay you and WHO else needs to know about invoices

There’s always a set of checks and balances in most companies when it comes to signing checks. Find out who cuts the check and who else they need permission from to cut said check. You’d be surprised how often this issue comes up. Accounting does all the number crunching and handles cash outflow, but they need the CEO’s okay on everything, or perhaps the person managing the project or team you’re working with needs to give their approval before you get your money. Avoid the run-around by knowing all this before you send that first letter mail, email or faxed bill out.

6. Be flexible with payment options

  • “I could pay you today, if only you accepted Paypal or Stripe.”
  • “If only you could handle international wires.”
  • “Our Paypal is currently frozen for investigation, do you do credit cards over the phone.”

Yep, the invoice-tardy will use this one too. Don’t get sucked into this mess by being one-dimensional in the payment methods you’ll accept. Suck up the cost too, so paying you on time is as easy as possible.

As you’ve probably gathered, getting paid on time quite often hinges on how many excuses you can eliminate before the due date arrives. Get the details ironed out ahead of time, be understanding if the very “occasional” delay occurs, and make it clear to everyone that you don’t mess around when a reasonable due date has been missed.

When all’s said and done, you’ll still have hiccups in receivables. It’s just the nature of doing business.

Image Credit: Garry Knight/Flickr
Image Credit: Garry Knight/Flickr

 

Main Image Credit: me and the sysop/Flickr

Chad Stewart

Chad Stewart is a staff writer for Previso Media who has worked in business for the better part of 16 years now. He got his start in the down-and-dirty world of intermodal logistics management, before moving into more challenging roles in retail and warehouse management. Chad holds both a Business Marketing and Operations Management degree from Sir Sandford Fleming College. In his spare time he enjoys traveling the world, time with his dog, fishing, snowshoeing, watching UFC and is an avid fitness buff.