Beth Smith, a business consultant at USC's Small Business Development Center, discusses billing - and collecting.
Cash has to flow in a small business.
But nothing is more frustrating than collecting for work already performed.
Yet when nothing's coming in from unpaid customer bills, you still have to pay those expenses going out. That makes it very hard for your business to survive.
Be very clear - about the fee/price you are charging and when the payment is due: This is a discussion you should have with your customer before the service is performed.
Always put your agreement in writing: Although "handshakes" are well-intended, they are very hard to collect on later.
Be sure you know what terms work for your type of business: Many of us are used to 30-day "float" on our credit cards, but many small businesses can't wait that long to be paid. Define what you need and discuss your terms with the customer and write them on your invoice.
Once you made the sale, you must ...
Review your receivables (accounts that owe you money): Do this weekly and reach out to customers who have missed due dates. Remember, the longer an account is past due, the less likely you are to receive payment.
Floating your customers by giving them extra time to pay their invoices costs you money.
It costs you once because your business doesn't have the money it needs to make ends meet, and then it costs you again, because if you borrow money from your own pocket, you have to pay yourself back, too.
Avoid borrowing from yourself (or others) in order to keep things going. Your business needs to stand on its own. Tell your customers that you need to be paid.
Be willing to offer payment plans to customers who fall behind: But make sure they stick to the agreement. We all know that unexpected things happen, and receiving some of the money you are owed is better than receiving none of it. Be sure your customers know that their calamities are understandable but their debts are not forgiven.
Keep your eye on the money - all day long: Review your financials weekly so that you know where you stand. It is the "pennies" that make or break most businesses. Reduce expenses associated with the business until you have the income to pay for them.