You’ve produced a quality newsletter, delivered it to your customer, and sent your bill. If you are like most small business owners, sooner or later you will have to deal with an unpaid invoice. There are some steps you can take, however, to increase your chances of getting all of your invoices paid in a timely manner.
First, don’t forget to send that bill. If you can, include it with your delivery or shipment of newsletters. Print it on paper that will get noticed, put it in a separate envelope, or deliver it by hand if you drop off the newsletter order yourself. Call attention to the bill in as many ways possible. If you send your invoices by mail, make sure that your invoice clearly spells out the job you did. It may be received by someone who is responsible for paying the bills, but who is unaware of the specific newsletter production services you’ve provided. This could delay payment of the invoice if that person must verify the job with your actual contact. Include information on how your client can pay by credit card. You’ll find that the easier you make it to pay with a credit card, the more likely it will be that your customer will pay in a timely manner.
Remember that the sooner you send out your bill, the better. Not only will you get paid sooner, but you will avoid possible confusion resulting from a client receiving a bill late. If you send out bills at a steady rate instead of all at once each month, you will also have a more regular flow of income.
If you haven’t established a policy for dealing with late payments, now is the time to do this. State clearly on your invoice the terms of payment, including how long an invoice can be outstanding before it is considered late. Typically, this is 30 to 45 days. Also state your charge for late payments, usually around 1.5% of the total invoice (amounting to an 18% annual rate).
You should also have a system for tracking payments and outstanding invoices. Once an invoice is late, send out a past due notice, along with a new invoice showing the additional late fees that have accrued. If you still don’t receive payment after sending out a past due notice, call your customer to find out why the payment has not been sent. You may find that the reason is simple—they have had staff changes, simply forgot about the bill, or had questions about the bill and hadn’t yet contacted you. However, they may indicate that they are having difficulties paying bills at this time. You may consider setting up a payment plan in order to ensure that you are paid eventually.
What happens if you still do not receive payment? You can continue to send past due notices and can keep calling, but at some point you will need to get the assistance of a collection agency. There are many agencies that specialize in collecting debts for small business owners. Good recordkeeping is a key to collecting on outstanding debts. You will need to document all of the notices you’ve sent, as well as contact names, phone numbers, and addresses. Collection agencies will generally work to collect the debt and will keep a portion of the bill as payment. If you are concerned about giving up some of your hard earned money in this way, just remember that getting even a small amount back is better than nothing.
As a final resort, you can consider suing your client. You must evaluate the risks and costs of this versus the chances that you will win and eventually collect the money. If you decide not to pursue this, be sure to keep track of all your unpaid debts throughout the year and discuss with your accountant how to write-off this debt properly.
A specific concern for newsletter producers involves the schedule of production you’ve established with your client. If you are producing a monthly newsletter, you will be working on the following month’s newsletter before you have been paid for the most recent one you’ve completed. If your customer does not pay, you may have two, three, or more outstanding invoices before you are forced to stop production for them. Plan on verifying a new client’s ability to pay before you begin work on their first newsletter. Be aggressive in your billing schedule and don’t forget to send out past due notices as soon as a bill is late. Good follow-up is crucial in this situation. You want to be able to minimize the loss you might incur from a deadbeat client as soon as possible.