As a business owner, you want to set up the best processes to ensure you are paid for your work. Take time before you start working with a customer to discuss your payment requirements. Be clear about your expectations, and put them in a written agreement. Address any common payment problems that come up in your business. Adopt a billing and collections policy, and stick to it.
Pricing. Meet with new customers and talk openly about the contract price and costs. If you are providing a bid or proposal, specify how long you will honor this pricing. If you provide a quote, be sure to explain how your final price may differ from the price you have quoted.
Discuss Payment Terms Up Front. Explain when payments are due and discuss payment options. If you are able to accommodate how your customers prefer to pay, you will improve your chances of being paid. Specify whether any deposits or retainers are refundable. Explain how payments on special orders are handled. Describe your policy on returns and list any associated fees. Outline your cancellation policy.
Written Agreement. Execute a written agreement with your customers specifying the price for the goods or services you are providing and the terms for payment. Discuss what happens if the scope of the project changes, and how such changes may effect pricing and payments.
Contingencies. If any payments are contingent on performance, be sure to outline how such performance will be measured and what happens if completion of your services is dependent on anther party’s actions.
Specify Consequences for Non-Payment. Make sure your agreement specifies what happens in the event of non-payment. Are you able to collect interest on the amounts past due? Are there late fees? Will you seek attorney’s fees and/or collection costs if you need to take action to collect the amount due? Are there other consequences you need to include, such as the right to stop work or final delivery until the amounts are paid?
Billing. Your billing methods need to be consistent and support your payment agreement. Invoice on a regular basis.
Collections Policy. Adopt a collections policy. You should establish a standardized process for collecting amounts due. In the event you have not received payment by the date the bill is due, you must immediately contact the debtor and inform him of the amount owed. Keep records of these communications. You may send one or more written follow-up requests for payment. Be sure to include the amount due, a request for payment of the debt, and the time when payment is due. You may want to offer to work out a payment plan with the debtor.
Legal Action. If you have trouble collecting from a customer, you may need to consult with an attorney, who can advise you on whether or not to take further legal action. One option may for the attorney to send a formal letter demanding payment. Before proceeding with legal action, it is important to consider whether you think it will be worth the time, expense, and stress of suing someone, and whether the debtor will be able to pay the debt if you prevail.
Payment and collection issues can be tricky. For more information, please contact Kathy Tremmel at Tremmel Law, PLLC at (512) 539-0317 or firstname.lastname@example.org.