Don't Be One of the 43% of Companies Getting Paid Late

Timing plays a big role in helping businesses maintain cash flow. When clients take too long to pay, it affects your ability to pay others and causes cash flow problems. Besides, you did the job. You deserve to get paid. RocketLawyer provides eye-opening results from its debt collection survey of 937 small businesses.

The survey reports:

• 25% companies struggle to collect payment from customers.
• 49% wrote off bad debt in the past year.
• 43% have clients who are over 90 days late with payment.

43%? And over 90 days late? Don't be one of the 43%. Here are six tips for getting paid on time:

1. Run a credit check. As a private lender, we do a credit check on clients and select customers prior to financing any client. Not doing this will makes us one of the 43% of businesses who don't get paid within 90 days.

2. Use contracts. A contract should plainly explain the product or service you will deliver and when payment is due. It may help to add a clause for discounts on early or on time payment and a penalty for late payment.

3. Send invoices on a scheduled basis. If you're a product-based business that requires half up front and then the other half on delivery -- then include the invoice with the delivery. For service-based businesses, pick a day of the month and stick with that. It can be the first day of the month or the first Friday of the month. The key remain consistent. And, make sure the payment due date shows up loud and clear on the invoice.

4. Call the customer. You may have a good relationship with the client. Use that relationship to respectfully connect and inquire about payment. You could make it a habit to call a day or two before payment is due with a friendly reminder. Offer to pick up the check, an option to pay another way or a compromise.

5. Send collection letters. An attorney help you with the letters especially those that are very late. Send them on a schedule, e.g. 30, 60 and 90 days past due, with each letter getting more serious. The attorney can write a letter describing the legal ramifications if the client doesn't pay or respond by a specific date.

6. Forward the invoice to collections agency. A debt-collection agency sounds seedy, but many have good reputations and know how to talk to customers owing money. As part of our financing services, we offer to help clients with collections. We know the importance of the client and customer relationship that we do what we can to avoid jeopardizing that when communicating with client's customers. Of course, the client may not want to keep the customer if it has come to this.

What if you could avoid steps 5 and 6? It's possible to do that with invoice financing, which allows companies to use invoices to get funded faster and skip the whole stressful collections process. Instead of spending time writing letters, making calls and inquiring about payment, they use it to do more business.

How do you deal with late payments? How do you prevent late payments?