Collecting Money As a Small Business

This post should go into the things I wish I knew more about when I started my own company four years ago file.  The reason we work is to earn money. If you’re not getting paid, you’re volunteering. Volunteering is noble and something I do regularly, but unfortunately it doesn’t pay the mortgage.

The Wall Street Journal just wrote an article about freelancers and small businesses that have trouble getting paid. It’s a good read for anyone, whether you run your own business or not.

I’ve been lucky in that the vast majority of my clients have been very good about paying on time. There have been a few instances, where it’s taken a little while, but we have had to write off very little that has been completely lost.  A few of the things I’ve learned along the way, that would have helped out in those instances include:

  • Include attorney fees provision in all contracts, so that if you have to sue it will be worthwhile (we haven’t had to yet);
  • If you invoice monthly, require first month’s payment before you begin work (I found sometimes that on short-term contracts i.e. three months, the term would be completed before we had been paid at all);
  • If your gut says to be worried, require at least half of the total payment up front;
  • Be flexible and ready to deal, sometimes something now is better than nothing ever; and
  • Don’t be afraid to contact multiple sources at a company with whom you have an outstanding receivables.

It’s OK to talk about money. It’s why we work.

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