07.13.18 | Business Law

Tips to Avoid Outstanding Balances From Customers

One of the worst parts of running a business is collecting payments. Though you may expect payment immediately, many businesses also send out bills once a week or even monthly. These can be harder to manage; months may go by before you get the money that you were counting on. Even though outstanding balances are common in businesses, it doesn’t have to be.  Here are some tips to avoid this problem.

If possible, do everything that you can to ensure that people are going to pay on time.

Expect payment upfront. Make that your policy, not the exception. When you get paid right away, you won’t have to worry about sending out bills and waiting to get paid.

Choose carefully if you do allow people to buy on credit.

Don’t let just anyone have the opportunity to pay you later. If you allow everyone to pay as they please, your business may quickly start to lose money and may even go out of business. Don’t let outstanding balances be a death knell for your business.

You should have them fill out an application prior to offering them credit.

This should include their information, such as name, phone number, and address, as well as your payment policy. This will ensure that they understand exactly when their payments are due.

It is also important to check their credit history first.

You need to make sure that your customers pay their other bills on time. If not, why would you expect them to pay yours in a timely fashion? If they have outstanding balances elsewhere, it’s likely they will with you too.

You also have the right to check on references.

By checking references, you are more likely to get paid and on time. By making sure you only extend credit to those that deserve it, your business will be more likely to succeed.

Don’t be afraid to talk about payment.

Most business owners didn’t get into business to talk about money and payments. It is actually hard to discuss this with customers. However, you need to get comfortable with it; otherwise, you will never be able to collect the money that you earned.

You may also want to give customers an incentive for paying on time.

Many businesses offer a small discount for those who pay their balance in full. Though you may lose a little money, you will gain time that you may have had to spend chasing outstanding balances.

Many business owners tend to overlook smaller outstanding balances.

However, if you have several customers who owe you one hundred dollars or less, it adds up (and quickly). You should make sure that everyone is expected to pay up – no matter the balance.

You should have a lawyer for your business and possibly a collection agency ready just in case.

The time to find a business lawyer and a collection agency is before you are actually going to need one. By meeting with a few, you will be able to start to build a relationship with the one that you choose. When the time comes that you need one (and you will), you will know exactly who to turn to.

The Bottom Line

The best way to get paid on time is to expect payment right away. You don’t have to extend credit to anyone. In fact, it should be your policy that you require payment right away.

If you do decide to offer credit, be careful. Make sure that they fill out an application and understand your policy. Go even further and check their credit history as well as talk to their references. You deserve to get paid and this will help to ensure that you will!

You should also consult a lawyer for your business and a collection agency. By having a relationship, you will know who to call when the time comes.

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