How to Ensure your Company Gets Paid – A 4-part checklist

In today’s fast paced business environment and tough economy, it is more important than ever to ensure that your company is paid for goods or services provided.  That’s why it is essential that every business establish and follow a structured methodology to extending credit and following up on problematic clients.

The following 4 part checklist, contains a series of recommendations that will assist your company with minimizing bad debt.

1)      Before the Sale

a) Establish your system for invoicing, accounting and billing.  This involves drafting appropriate, industry specific contracts setting out the primary terms of your relationship with the client.  An essential component of this step involves training your team to operate the system in a consistent and reliable manner.

b) Research your client – This step involves qualifying the debtor.  Credit checks and trade references can be particularly helpful in properly informing yourself.  You should also take a good look at the history of your client’s business.

2)      Sale of Goods or Services

a) Document the sale – make sure you send your invoices and obtain signatures. Evidence of delivery and receipt is essential if a problem arises.  If possible, make sure the person signing has authority to do so and confirms the goods or services are in the agreed upon state.

b) Protect your interests – when appropriate, obtain guarantees and security.  Get a deposit and ensure payments are made on a timely basis.

3)      After the Sale

a) Keep on top and follow up – always watch for warning sign such as late payments or NSF’s.  Other signs of trouble can be returned mail, a full voicemail box, e-mails bouncing back, websites going down, or a disconnected phone or fax machine.

b) Document your correspondence – as much as possible, keep notes and records of your correspondence.  Try to get responses in writing from your client by e-mail, fax, regular mail or otherwise.

4)      Mitigate Losses and Act Decisively

a) Send your internal demand letter – do no let a debtor continuously delay.  Set a date for final payment, and stick to it.

b) Cut off the customer – stop providing supplies or services until your invoices have been brought up to date;

c) Call in the professionals – if all else fails, send the debt to a thirty party to collect on your behalf.

Developing a system around these steps will provide your business with the best opportunity to get your company paid for the goods and services provided.