One of the most painful aspects of being in business is getting paid. If you’ve been in business more than five seconds and offer credit, then you know what I am talking about. There is everything from the “I’m not happy so I’m not paying” comment, right through to complete ‘ghosting’ where you are completely and utterly ignored and avoided. As an experienced business coach, I see time and time again posts on Facebook business groups sharing their challenge around this subject or my clients asking me for help.
Here are my tips on the matter about getting paid – which comes from over three decades of working with Australian businesses.
Do a great job!
First and foremost, make sure your business is running correctly so that you provide a great service all the time. Checking in with customers that they are happy also works well and of course, if something isn’t going well, do what you can to get the job on track. Be fair in your approach to this; is their expectation reasonable or are you being unreasonable?
A gentleman’s agreement means little.
Gone are the days (to some degree) where a person’s word was worth something. For this reason, it’s terribly wise to have well-prepared contracts which cover off on everything. Be sure you are invoicing the correct entity and that you get your signed contract back. I strongly recommend you visit a solicitor; I realise this costs money, but the sad truth is that you could lose more than what you are owed.
Discounts or Late Fees.
Again, consult your solicitor in this regard. My understanding is that the fee must be reasonable and must be advised right up front before the product or service is provided. As to offering discounts, I’m not a fan of this, unless you have built your discount into your pricing. Discounts are a nice incentive but if your quote is too high (because of the padding to cover the discount) then you may well price yourself out of the job.
Do your due diligence.
You can run searches on businesses and individuals (for a fee) but even just check them out on Google with a search. Listen to what the person says, for example, if their story includes “everyone hassling me for money” or “I’m in a hurry, can you process the order before I send you the deposit?”. I know you’re excited to get a large contract or job, and you’re counting those dollars, but don’t stray from your processes EVER … I can assure you that the moment you do is the moment you get caught out. You may even ask for Trade References where appropriate.
Take a deposit.
Where possible take a deposit and have interim or progress payments. If it’s someone you’ve never worked with before you may even insist on COD. Likewise, if you worked with them before and payment was slow, again you may require payment in advance or COD. Remember, if you have a mobile Eftpos/Credit facility, then there is really little excuse. Some businesses even ask at time of order “how will you be paying for this?” and getting that really clear up front. This isn’t suitable for every business, but worth thinking about.
Reduce your payment terms.
Whatever terms you offer, most people take double that. Give 30 days and you’ll often wait two months to get paid. If you give 7 days then it’s more likely a fortnight. For that reason, I always strongly recommend to clients to not offer too long. Even if you’re on 7-day terms, you may not begin chasing till 2 weeks is up, but that is your choice.
Invoice promptly and expect spam filters.
Be sure to invoice as soon as the job is done and not delay. The longer you take to invoice, the longer it takes someone to pay. If they are struggling, then someone else might get in ahead of you and the money runs out. For this reason also be very aware that spam filters will regularly send invoices to spam boxes and few people check their spam boxes on a daily basis, if at all. For your first invoice (where systems don’t recognise you) add a read receipt and if you don’t get a response, send a text or call.
I don’t want a bad reputation!
This is a common factor. People back down or are not as firm as they should be because they are scared of developing a reputation. I’d be happy to pass on the reputation of “soft” or “walk over” and quite happy to be known as “firm but fair”. If your terms are clear, your service quality and you invoice promptly, then get straight onto debt collecting sooner rather than later. I once was abused by a fellow for daring to ring up and ask to be paid. Well, how dare he not pay his bill and put me into that situation. Unless you are a charity, you don’t provide free services and it’s very reasonable to ask to be paid. Sadly only 25% of business owners pick up the phone and ask to be paid. Other businesses literally ‘bank’ on this. I recall years ago seeing a desk full of cheques … the response to my enquiry “we only mail them out when people start to scream”. Collections should be polite, but always firm.
This is a hard one, especially in the building game. The contractor above you will argue that if you finish the job, they can invoice and then you can get paid. What you have to weigh up is that can you truly believe that AND will they actually fulfil their promise? If a business cannot pay its bills as and when they fall due, they are actually trading insolvent. You could be throwing good money after bad. It’s a huge gamble and my recommendation would be to freeze.
They are ‘ghosting’ me – what now?
So they have disappeared and don’t answer their emails or pick up the phone. Be worried; that’s a solid sign you may have an issue. Before you send the matter to a debt collection agency, I would give it one last go “First & Final Notice” but the thing is to send it Receipted/Registered post. This forces them to sign for the letter – making it very official. Give only 7 days to pay and then be sure to do what you promised – send it to a debt collector. You may lose 10-20% of the fee, but to me getting 80-90% of something is far better than 100% of nothing. Just be sure you understand the collection agencies policies; as some firms are ‘feeder’ businesses to legal firms and they will only do a letter or call (or two) before starting to charge you legal fees for further action. Make no assumptions on how much they will do before it goes ‘legal’.
I’m in the right, so the law is on my side.
Sorry guys, I wish this were true. As a solicitor once said to me “you go to court for a decision, not for justice”. You may well be in the right, and if you are, then I encourage you to use QCAT or other legal avenues, however, the devil is in the detail and in your documentation. If it’s not in writing, it means little. A client may promise something, but unless you have a very clear statement in writing, don’t be surprised if they change their story and the adjudicator or judge rules in their favour. For this reason, well-worded contracts are critical as is retaining all correspondence and relevant emails.
As I said, offering credit and worrying about being paid is a huge disadvantage of being in business. Many of us in business would never dream of not paying our bills, or getting services off someone which we cannot afford. Unfortunately, not everyone is as ethical – hence, you need to be prepared for the worst, hope for the best and take what comes in between.