An IOU means nothing when you have real bills to pay. We asked nine entrepreneurs from the Young Entrepreneur Council how they ensure their invoices are paid on the quick. Here's what they had to say:
1. Charge credit cards upfront.
We went through a rough period where invoices were very late from a few clients. Now we collect everything up front through credit cards. You lose a bit of money from the transaction fees, but having the cash up front is totally worth it for us, especially because we don't waste our energy running after unpaid invoices.
2. Say thank you.
Avoid generic language like "ACME thanks you for your business," and add a genuine, heartfelt thank you to invoices. FreshBooks estimates that simply adding "thank you" can increase the pay rate by 5 percent, which makes it worthwhile to test.
3. Send reminder emails before payment is due.
The best way to avoid having delinquent accounts and increase the speed of collections is to send out a friendly reminder email to your clients that their invoice is due the next day. It's much better than telling them they are late at making a payment. It can be automated with software and significantly reduces the likelihood of that account becoming delinquent.
4. Require deposits.
We don't start work on projects for a new client without a deposit. Even if it's just a token amount, it forces them to put some skin in the game. It's a simple thing, but I'm amazed at how many startup service firms don't do this.
5. Charge a fee for late payment.
While charging late-payment fees can be upsetting to customers and vendors, many will understand the reason for it and simply pay invoices faster rather than actually paying a penalty.
6. Seek legal counsel.
As heavy-handed as it may sound, in several cases where invoices were months past due, I have simply had my lawyer send a short, friendly email asking for an update. A few days later, a check appeared. Use when necessary to avoid crying wolf.
7. Use PayPal.
We have started using PayPal for many of our contractors. Unless you're paying by credit card, the service is free--and fast. I have noticed that many people think there's a charge to send someone money, but generally there's isn't a fee through PayPal.
8. Make friends with clients' accounts-payable staffers.
For big clients or customers, have your account manager or accounts-payable department send them a small gift (such as cookies) proactively, along with a note introducing yourself as a resource and letting them know that you're thrilled to be working with them. And then make sure your invoices stand apart from others, such as by color.
9. Knock on their door.
For some clients, the easiest way to get paid is to knock on their door and collect payment. It's very easy for some people to dismiss your calls, emails, and letters. They may just be putting it off because it's inconvenient for them, or they're trying to wait you out. Saying hello in person can set tardy vendors and clients straight without being confrontational.