Self Employed-Any Tricks for getting paid on time

[WildOne]

For all the self employed amoungst us, what tips tricks do you have fr getting paid on time? I'm finding the smaller clients (private and small business) are great and you usually leave with cheque in hand and a smile on the face. The larger clients however ignore agreed terms and sit on your money for as long as they see fit:mad: What tips or tricks do you have to convince them to pay up on time?
I'm taking it really personally that one particular company is not doing the right thing by me and unfortunately they account for 90% of my work:(
Very frustrating....

[Pedro_The_Swift]

The Local Government Authority I once worked for had a clause in their Purchase Orders stating no payment for 90 days.
The only times this was ignored if there was financial gain in paying on time.
Offer a ten percent discount if paid by months end.

[feral]

There's a bloke around town called Mick G...... who allegedly is very good at getting money out of people.

Fairly easy to track down, cough up your payment and you will have your money.

Easy.:rocket:

[WildOne]

There's a bloke around town called Mick G who allegedly is very good at getting money out of people.

Fairly easy to track down, cough up your payment and you will have your money.

Easy.:rocket:

:D:D tempted to pay myself to do it!!

[Bigbjorn]

Add 20% to your quotes and offer discount if paid within 7 days. In my earthmoving equipment days we used to do this to some of our crappy clients who always wanted to argue about the account, the work done, etc.

Otherwise, one of the Brisbane motor cycle "clubs" have a debt collection service. They keep 25% of what is collected. They send a couple of negotiators around to visit the slow payer. Negotiators are usually 7' tall and 150kgs, in colours, chains etc. They offer a form of health insurance.

[WildOne]

:D:D:D Thanks for that, good to have a laugh at the thought of doing that, the thought of the mole of a woman responsible for processing my invoices being confronted by a couple of 150kg healthcare brokers would be worth watching:D:D
Things are a little stressfull this week, limited earning potential with the disco off the road, wedding coming up in a few weeks and people not paying!!!!!!! Oh and did i mention parents coming to stay for 3 weeks...:angel:

[oldyella 76]

We run a small business that services the rural sector in fertiliser ect. We have the same problem with corporates, solicitors and accountants who own farms in the Kyneton / outer Melb. area. They are the worst payers. I have a 3 page credit application form that I make them sign which clearly states the trading terms and the interest component for late payment. You also have to be timely in the sending of statements & overdues. We send statements for two months Then we send a letter that requests payment and ask if there is any reason the account has not been paid. If no reply we send a letter of demand in a registered letter that explains that inspite of previous letters and no response was recieved, we now ask for payment in 7 days or the matter will be put in to the hands of a debt collector, that means the the person it is addressed to must sign for it and you then know he has recieved it. Give them 7 days (no more) and put in in the hands of someone who can take the action further. It costs us an initial $6.50 for them to then send a letter of demand and then leave it their hands.
Remember a job is not a job until you have been paid.
I have a template here for you to change if you need.
This does not always work as we have one going through bankrupsy? at the moment.

[abaddonxi]

Write up a set of dunning letters, or get a lawyer to do it for you.

Start with the seven day terms at the bottom of the first invoice. Followed by the, 'it's been seven days and we haven't received payment,' etc.

A firmly worded letter to the accounts department might get the money moving and keep the relationship with the face to face client jolly.

Or send in the wife and kids to wait for the cheque, or somebody else's wife and kids if you don't have one.

The discount for quick payment, as above, is a great one since it doesn't get you arguing with the client.

Cheers
Simon

[WildOne]

Some good advice thanks, i've been running my own business since the start of the year and its a steep learning curve, very rewarding in some aspects and bloody hard work in others:o

[mrapocalypse]

We run a video production company on the side and my wife does event management. For the video we have stopped handing anytihg over unless there is a cheque. We give them a preview disc with a timecode so they can't use it. Then the day before masters are handed over we call to remind them nothing will happen unless there is a cheque waiting. They almost always freak out! But they know it's not unreasonable for us to expect to ghet paid!

Also started to get a corporate Amex deposit system going. 30% upfront and then we threaten to just charge the card. That was hard to organise.

We also started looking for new business that pays on time. It was hard but we just keep insisting......

Wife says no pay, no event. It's too hard to get them to cough up after the party. She has even turned the lights off and locked the door becuase the terms were not met, and this was with a masive Sydney Medical insurance company! Somehow they found someone with a card who could pay the 15 grand on the night!

Getting money out of these a-holes takes a lot of guts and trouble.

We found that a deposit was THE BEST thing. At least if they really hang out then you don't go broke and most of your expenses will be covered.

The early pay and discount is a great idea too. You will just be paying interest on your overdraft anyway!

Ian.

[solmanic]

I find that as soon as I issue an overdue invoice with interest applied (my terms are 18.5% pa compounding daily on overdue amounts) the payment miraculously appears.

I also time-limit any electronic documents I issue to expire when the payment is due. It doesn't affect the client if they just print them but more and more people keep everything electronically. A blank screen when someone goes to open a PDF prompts a phonecall, which prompts me to remind them that they have an overdue invoice :D. Once they have paid they get an un-secured file.

[Tusker]

Its a perpetual problem. Govt departments can be the worst.

A couple of other things not mentioned so far:

1. Diversify, so you're not totally reliant on one customer. 90% is too risky.

2. You can't make it too easy for a customer to pay, Get credit card facilities if you haven't already. The cost is worth it.

3. Have clear payment terms agreed upfront, before the job starts. Not on the back of your invoice. Doesn't help initially, but it will in a dispute.

4. Don't have those 30 60 90 day boxes on your statements. It just implies you accept delayed payment.

5. Lastly, it seems these days that payment doesn't happen until you chase by phone. Seperate the debt collecting from the work, play good cop-bad cop. Get someone else to do the chasing if you can.

When you grow beyond the one-man band, using a fictional name & email address when chasing really works. You can maintain a good relationship, and the aggro is with "Bob" in your admin section.

Regards
Max P

[MacMan]

I must start using the security features on PDF more often.

If you are having ongoing trouble, it might be worth looking at opening a Dun & Bradstreet account so that you can do a basic bureau inquiry on ALL account applicants before you advance them any credit. D&B have a debt collection agency too. Anyone who has had a judgment against them or been bankrupt pops up with details of the issues (detail varies on how much you pay) but it was VERY useful for one of my previous jobs where we were pushing as many new accounts as possible.

A simple warning that an uncontested debt (uncontested if they have not responded to invoices, outstanding invoice letters etc) will be taken further if payment is not received within seven days is normally enough to get action.

I have had to go and make a nuisance of myself before to extract final payment but if it comes to that you've come to the end of your relationship with the soon to be ex-client.

Another good one if you are finding it hard to contain yourself when these pr!cks don't pay on time, but you want to keep the business, is to get another family member to become the "accounts payable officer". This way they can do the verbal kicking of the client's accounts person and you can stay nice and friendly with the people you normally work with. I know how hard it can be to contain the frustration when the odd invoice is paid late but you want to keep the client.

[MacMan]

BTW Dun and Bradstreet - Credit Reporting - Debt Collection - Marketing Lists (http://dnb.com.au/) is the Dun & Bradstreet website.

[mrapocalypse]

I agree with separate production and accounts departments. All companies do that. And rarely in big organisations is it the person saying yes to and managing the job and working with you that ever talks to thier accounts dept.

[100I]

Unfortunately (and I don't mean to offend any accountants) to most accountants you are simply a number on their screen and when managing cash flow the squeaky wheel gets the oil...
Make yourself heard.
Do talk to your regular POC as well, let him/her know your frustrations and he should talk to his accounts dept to inform them how valuable you are to him as a contractor.

[bblaze]

Self employed for over 15 years
Bast*rds thats mine money and I want it
Few things I have done are
Put a multi national company in the collectors for $50, might add that they didnt like that (or me). Paid within 3 days
Put a local realstate in the collectors for $15. Paid the same day and they asked me why , why wouldnt I, its my money.
Swipe their credit card at the time the job is done, you will be suprised if the company needs your surverices what resources they have available.
Turn up on site and start dismantling and removing your property (makes interesting conversation in a busy office)
Invoice on completion of job with terms clearly stated (no more than seven days), follow up with statement (with accounting fee) so they recieve it on the seventh day. etc
Had people ring me and say they are doing it tough, what can we do. I will talk to any one that rings and as long as they make some endour to pay and keep in touch thats ok.
If you owe me money dont dare cross the bloody road and make out you didnt see me (my pet hate)
Had one company that we had been working a small debt with for about 18months, they eventual went belly up and we were left with about $1000 that we thought we were never going to see. Had a knock on the door 6 months latter with the director there with the balance in cash, I asked him why and he said that we were the only ones that tried to understand and were willing to work through the issues with them.
Only ever lost a total of $2500 from 2 seperate jobs the whole time I have been self employed.
COMUNICATION
cheers
blaze

[WildOne]

I have no worries about not being paid by the offending company, it's just their lack of consistency relating to when they pay, plays havoc with cash flow and really frustrates me:mad:

Some good tips there thanks all for the advice

Cheers
Phill

[MacMan]

Also, the nice thing about websites is that they can be turned off. No trespassing required!

It's amazing how quickly some people deal with payment when they are REALLY interested!

:twisted:

[Jamo]

My major clients are all banks and don't like paying up.

I have found a phone call to their accounts section has helped in the past. Explain that you are a small business and can't afford to carry the debt. Quite often it's the person in the account section who can make the decision to pay earlier.

I tried the discount thing, but generally the bigger they are, the less they care about it. As someone said earlier, if they're consistently late, jack up the fee. They may not pay earlier, but at least you're compensated.

[MickG]

There's a bloke around town called Mick G...... who allegedly is very good at getting money out of people.

Fairly easy to track down, cough up your payment and you will have your money.

Easy.:rocket:

:eek::eek: Hope that's not me you are refering too........I am in the lending bussiness, but we use professional collectors if things get bad:D

Agree with all said so far, especially diversify your client base........90% from one customer is insane.......they dissapear and so do you, very quickly.

[ivery819]

From the information you have supplied there are several issues raised.
Firstly, if this customer constitutes 90% of your income then unless you have the correct business structure, legally you may NOT be a contractor......you are an employee. This has all sorts of legal and tax ramifications.
Slow payers are not always bad payers. If an organisation is consistently reliable but slow in paying then the problem is how you cope with your cash flow. There are many ways to deal with this. Padding your quote is NOT one of them.
In the short term I would suggest you visit the ATO website as well as any Federal and State Government web sites that have an abundance of advice for small businesses. GOOGLE is your friend.
You also need to quickly seek advice from a small business adviser. Many of the financial institutions have a free service or your accountant may be able to suggest someone if he/she won't do it themselves.

[Bigbjorn]

1. Diversify, so you're not totally reliant on one customer. 90% is too risky.


Max P


I agree. If you have basically one customer, then you are not really self-employed. Most likely you are working for less than they would pay an employee who gets sick leave, annual and long service leave, leave loading ,overtime, superannuation.

[Rob101]

All of the above options are probably effective.
They have varying effect depending on your client.

I think that you need to be very, very careful not to bite the hand that is feeding you. 90% of your feed is from the one person, that's big.
Don't do something stupid.

Make the distinction between a later payer and a defaulter. If you get paid anyway, pay sufficient attention to your cash flow until you diversify.
Get to the point where you have enough customers, and a good enough reputation to request payment on delivery.
If you continually get paid, but it is a little late - the business might be worth the frustration.

Is it easy to pay you? Paypal might help. A friend offers payment for goods and services through paypal with a 2% surcharge for the pp fee.

My father is self-employed. I remember all the horror stories of defaulting clients. you see, after your 'install' something in a house, it's a fixture and therefor the property of the house owner - you can't remove it. paid or unpaid. I still get the chills, now especially that I know how much cash was stolen from him over the years.

I wish i'd been at that function mrapocalypse was talking about.

You could envite them to go shooting for the weekend, right after they decline to pay or envite them to your local MMA club for a free introductory lesson (particularly effective if you're an instructor).

[Tusker]

snip


Firstly, if this customer constitutes 90% of your income then unless you have the correct business structure, legally you may NOT be a contractor......you are an employee. This has all sorts of legal and tax ramifications.

Not strictly true. Employment arises from a common law employment relationship, ignoring Workchoices. That relationship doesn't depend on the number of customers.

I think you're referring to the PSI / PSB tests. If these come into play, the contractor status doesn't change, its just that deductions are limited to those of an employee.

Regards
Max p

[disco2hse]

I have been through the range of small clients and large and now I charge rates that mostly discourage smaller companies. As others have said, there is a difference between getting your money late and not getting it all. Small clients are more likely to default and since I have culled them I almost never have recourse to debt collection services.

This is how I handle it:
1. Have your Terms and Conditions of Trade well sorted. Get this written by your lawyer and arrange it with a nominated debt collection agency. Usually you will find that you can only claim collection charges when they comply with local statutes. Often you can only charge late interest if it is already stated clearly in your Terms and Conditions, and to do otherwise may be in breach of contract laws.
2. When an invoice gets to 30 days I send a friendly reminder notice that states the invoice number, date and amount.
3. 10 days later I send another that also mentions the last letter.
4. 20 days I send another, as above.
5. At 30 days past due I send final notice that warns that if the account is not paid within 7 days the account will be passed on to the nominated collection agency. This is followed a couple of days later with a phone call to the accounts payable department. That usually gets action quickly.
6. Encourage payment by direct credit into your account to minimise delays in processing and extra deposit charges.
7. Send monthly statements of account.

For small clients I usually charge cash up front, before the job is commenced.

[IanP]

Had the same problem when running our engineering business. We ovecame it by adding 10% to every invoice and quote and then giving a 10% discount if paid within 7 days OF INVOICE DATE - worked a treat. Those that did not pay on time and then took the 10% were put on STOP SUPPLY until the 10% discount they took was repaid. A sale is not a sale until you get paid for the goods or service.

[Bigbjorn]

This refers to post #25 above by Tusker, not to debt collection. The Qld. government is in the process of introducing, for payroll tax purposes, a classification of "dependant contractor" for allegedly self-employed contractors who work principally for one client. They will be classed as employees and the employer will have to stump up payroll tax. The segment that is thought to be most affected is the building industry where there are a significant number of sub-contractors who work only for one prime contractor and in most cases are labour only, or supplying only a minimum ampount of material, e.g. nails. The government is going to class them as employees who are using an arrangement of contrived self-employment to evade taxes.

[LoveMyV8County]

I'm an accountant and have been the 'payer' to small businesses when I have worked for both cashed up companies and ones that are totally broke.

Some good advice in the posts - I would concentrate on:

1. invoice IMMEDIATELY (if not sooner). Invoice for materials up front even if you have not done the work yet.
2. use A4 paper rather than the smallish duplicate invoice books from the newsagent - less likely to be lost in a pile of papers
3. use coloured paper! Same reason as 2 (will stand out). Surprisingly effective.
4. prompt payment discounts often work - 10% is too much though (10% off a monthly invoice is equivalent to more than 120% per annum) unless you have added 10% to your price. 2.5% is more normal.
5. politely explain that you can't do the next work they ask you for because you haven't been paid for the last lot
6. reminder letter after 2 weeks, collection letter after 4 weeks. Either have your own collection business name (different phone no.) or many collection agencies will provide you with a pad to use at nominal cost
7. Make it easy to pay - credit card, EFT. Perhaps PayPal depending on customer base.
8. In difficult situations, request a cheque to be available at the end of the job (but give plenty of notice of this).
9. Phone accounts dept twice a week to follow up late payment. Squeaky hinges get the oil.

Some organisations cannot process payments quickly because of authorisation processes, or only doing payment runs on certain days or intervals. Find out when the payment runs take place and ask for your payment to be in the next run if the one after would make it late.

Good luck

Chris

[Bigbjorn]

Putting them on COD often works wonders. In my earthmoving equipment days, as Sales supervisor, I was asked by our accountant and Spare Parts Manager about possible effect on equipment sales if one of Australia's largest civil engineering and construction companies were put on COD or even dunned for payment of outstanding parts and service accounts. They typically took 90-120 days to pay and our terms were 14 days for service and 30 days for parts. I said go for it. They don't buy anything from us, they don't buy new, and most of our gear they owned they bought seond-hand overseas and imported it. Well, didn't our parts and bean counting people get some abusive 'phone calls. The client did get the message eventually when they had a machine down and after-market parts suppliers could not supply large and expensive OEM components.

[Disco300Tdi]

I only used four magic letters of the alphabet "VCAT". :twisted:

Always worked for me, just threatened to go there, never actually paid the $27 lodgment fee myself...:D

[hiline]

i could rant on about this topic as well ;)

but if i did i'd surely get booted for life with some of my tactics over the years:whistling:

only problem being is once you cross them lines they dont call you again.........

bloody great i say :D:D:D

[HAK]

Mate if they are 90% of your bread and butter there isn't much that you can do Discounts for early payment is the best option or intrest charged for late payment these can included in your final invoice

Mmmmmm did this for a living once upon a time :( collection ya gotta love it

[p38arover]

A friend used to work for food producer, Mountain Maid. One of Australia's biggest two retailers who stocked their product took the discount for early payment but still didn't pay for 90 days.

Mountain Maid couldn't do anything about it - otherwise the grocer would have just dropped MM's products.

In your case, you are in a similar boat. They provide you with 90% of your business so you can't do too much to annoy them.

[Panda]

Hi Wildone,

What sort of work do you do?

I find at work, the bigger the company, the less likely they are to pay on time. If they make up 90% of your income, you don't want to p them off! Quite often, it's a case of red tape in the accounts department, has to go through various people, get approved, etc. We've found the best practice is to get to know someone who effective in the accounts department, & be nice to them. Phone them & explain that you're a small business & can't afford to run on credit & would appreciate it if they could pay on time etc. Most often when you are nice to people in these situations, they get to know you on a more personal level & will help you out. You get more bees with honey than vinegar!

Of course, as your business progresses & you get a bigger client base, it will be easier! Hang in there!

[Utemad]

Having worked as the government guy who's job it was (amongst other things) to pay the bills, I can assure you that making it easy to pay is the biggest thing you can do Also use A4 paper (typed) like someone previously said. Far to easy to lose the small paper ones and too hard to read the hand written ones).
Different colour is also good as it stands out against the 30 gazillion other pieces of white paper on the desk.

One place we used only accepted cash or direct money transfer. This was for $1k+ bills. So they always got paid last. Not necessarily because I paid them last but because people who took credit cards over the phone got paid straight away (easy to do). Whereas people like them had to have a government money order sent to them which took about 30 days to process on our end before it was even posted to them!

Also a friendly reminder call to me didn't bother me. Generally it meant that the manager who ordered the gear hadn't given me the bill yet and I didn't know to chase them up. So if you don't call it will be a long wait since I didn't even know we owed you anything. This is when monthly statements sent to the admin section (not the person who ordered the gear) would help.

I've also worked in family business so I know how much it hurts to be on the other side.

[Panda]

I can assure you that making it easy to pay is the biggest thing you can do Also use A4 paper (typed) like someone previously said. Far to easy to lose the small paper ones and too hard to read the hand written ones).


One place we used only accepted cash or direct money transfer. This was for $1k+ bills. So they always got paid last. Not necessarily because I paid them last but because people who took credit cards over the phone got paid straight away (easy to do). Whereas people like them had to have a government money order sent to them which took about 30 days to process on our end before it was even posted to them!


Very good points Utemad - Making it easy to pay is one of the biggest things you can do, as you said credit card payments, & we find alot of people like to pay directly to the bank account, so we have the account details on our invoice. We also now find alot of people like to have the invoice emailed to them, as they often misplace the hard copy. We got so sick of chasing bills & people saying they'd lost the invoice, & could we email it to them, that we now email our invoices, as well as send them by mail.

[HAK]

the formality in 99% of the bigger companies is that some has to sign it of before the Accounts payable department can pay it so do the walk go visit the guy who signs it of then walk it to the Accounts Payable department for payment and thats about all you can do

[blitz]

I agree with much of what has been said above. Even though the thought of of sending in the heavies to get the money is a good one the reality is you will never see the client again - with some that is the better option anyway.

We have been running our own business for 16 months now and have just bought / hired on of those swip card thingo's, that has make a huge diference for us, also we have started doing a non refundable deposit (we do training, so if they dont turn up we have lost out and cant recoup the money)

Finally my partner is the sweet one who rings and gives the plesant reminders. This works most of the time, the tardy ones I ring I am always polite, just firm regarding payment. If we arent paid then we dont hand over the finished paperwork which means that they have wasted their time as well.

Cash flow has been our biggest headache as bills dont stop just because your accounts havent been paid. Good luck with it I am enjoying it much more than working for someone.

Blythe

[Disco95]

I work for a the largest kitchen manufacturer in our area as a designer. We don't let anything out the door, generally, till we get 95% payment.
Our larger builders (5 or six kitchens a week) know that they don't get kitchens if they're not up to date.
You've gotta be hard when the situation calls for it.
It also helps to have someone else saying "well untill we get paid your job doesn't get finished"