59% of small businesses are struggling with income due to late payments according to a survey by market research and data analytics firm YouGov. Additionally almost one-third of small businesses say that receiving payments 20 to 30 days after their due date is putting them at risk for closure.
Experts recommend taking these four steps for dealing with late payments.
First, optimize your cash flow by collecting a deposit before a job, invoicing in advance, drafting a contract that stipulates terms of payment, doing a credit check of the business or individual paying you, and digitally tracking your invoices.
Second, be prompt with following up on late payments. Reach out to the customer via email, attach a copy of the invoice, and remind them of their options for payment method.
Next, if a month has passed with no email response, call the customer. Identify the correct person to speak with about payment and focus on the agreement made.
Lastly, if the customer fails to take steps towards payment, you have three final courses of action. You can refuse to complete further work and restrict access to any shared documents or brand assets. You can also go to a collection agency who will follow up with the customer in exchange for 20% to 35% of the payment collected. If necessary, you can take legal action if the damage is substantial and worth the investment of time and money.
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