For most small business owners, working long hours is something that is too familiar. After putting in such long hours, one would reasonably expect to yield great monetary benefits; however, this isn’t always the case. Periods of cash shortages happen, as Business Law attorneys we see it all the time. It even happens to us. The true question that presents itself in these tough situations is “what do I do next?”
Here are some steps you can take:
Assess Clients Carefully:
When providing a good or service to a particular client, it is important that you receive your payment on time. In cases that involve large projects, you might want to consider beginning with a smaller project in order to get a feel for the client that you’ll be working with. This attention to detail at the start will provide effective collaboration and an accurate assessment of expectations on both sides of the deal. The small project will also give you information regarding how fast the client will pay you. Because most bills are due monthly, on-time payments are crucial in making sure that the financial state of your business remains sound.
Diversify your Client Base:
A variety of clients creates a sense of income security. If you operate a business that is dependent on one client, such as a contractor, you are vulnerable to cash problems if something goes wrong during the payment process. This concept doesn’t mean that you should take on more projects than you can handle, a firm client base just provides a better opportunity for monetary success.
Let a third party handle client payments:
Another way to reduce the risk of late payments is to involve some of your clients with a freelance platform. Within these platforms, you have the opportunity to collect payments from your clients weekly, bi-weekly, monthly or quarterly. Additionally, some services even require clients to make payments at predetermined points as you hit certain project goals.
Negotiate contracts carefully
Ask for a substantial deposit on projects upfront with progress payments along the way if this is customary in your industry- rather than billing for the whole project after its completion. Set a specific date for the deposit to be paid, preferably at the beginning of the month. You can also offer the client an incentive for paying their deposit early.
Finish Projects on time
As business law attorneys, it's imperative that we plan a schedule and stick to it. In some cases, there could be a situation where you have numerous projects in the works and none completed yet. This can present periods where you can’t submit many invoices- which can lead to a trickling money flow. If possible, upon scheduling, try to bring as many projects as possible to the finish line while keeping quality at a high standard. The faster you complete a project, the faster you get paid.
Stay on top of invoicing
No matter how busy you are, set aside at least an hour or two a week to submit invoices so you don’t fall behind. If you do not have the time to efficiently complete these tasks, consider hiring a secretary to help. Additionally, electronic payments can speed up the payment process. Although some may present additional fees, it is still a great way to ensure effective payments.
Make sure that you follow up with clients. It is sometimes common for an invoice to get lost in someone’s inbox and the sooner you figure out that this happened- and follow up in a respectful manner- the better. One way to notice this mishap is to use your email functions to see if the email was read.
You're not alone, let our expert legal team help you. Call our Business Law attorneys today: 618.659.4499.