Minimizing Late Payments To Maximize Your Cash Flow
From Trent Hamm
One major part of my small business is simply selling content I’ve produced – written pieces, speeches, seminars, and so on. With each sale of my content to a customer, we enter into an agreement where I’m expected to produce content at a given time, while they’re expected to produce payment at a given time. A small business at its core, in other words.
When I first got into this type of work, I was often too timid to follow up on the payments due to me – and some content buyers took advantage of that. They’d fail to pay me by the time specified on our agreement. I’d decide to give them some time to avoid confrontation. A few months later, a payment might drag in – sometimes, they’d try to avoid ever paying me.
Obviously, this type of approach is painful for cash flow. It also taught me a very vital lesson when it comes to managing the cash flow of a small business: you have to be assertive.
Now, if a customer is even a couple days late with their payment, I contact them. During this contact, I directly ask where my payment is and when it will arrive. This type of assertiveness gets results most of the time, as people who owe me money will usually take care of the minor problem immediately before it blossoms into a large one. In fact, most of the time I discover that it’s a minor human error that can easily be fixed by the simple reminder of my phone call or email.
What if this doesn’t work? Escalate. What I often do, if I find that a payment due to me is more than a week or two late, is escalate my issue up the chain of command at the business I’m interacting with. I contact the supervisor of the person I originally interacted with. I usually provide documentation of my previous interactions and again request my payment.
These two steps have resolved virtually every late payment concern I’ve had over the last several years. In the rare event where these two techniques do not handle the situation, I continue the contact with the company in order to get my money, then after a period of time of nonpayment, I evaluate whether or not legal action is worthwhile in that case. In either case, if it reaches this point, I cease all future business with that individual or organization.
Here’s the real scoop: don’t allow late payments to skew your cash flow. If you find that a payment due to you is late, don’t let it dangle in the wind. Contact them and see what the issue is and whether or not you can help resolve it. More often than not, it’s a human issue that’s easily resolved by being assertive and taking the initiative to make timely contact. If you find that there’s a greater issue at work, minimize your future relationship with that person or business.