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Indebta > Small Business > How To Ensure You Get Paid In Full For Your Work
Small Business

How To Ensure You Get Paid In Full For Your Work

News Room
Last updated: 2023/06/15 at 3:28 AM
By News Room
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Petr is the founder and CEO of Invoice Home, an invoice generating platform designed for small businesses, freelancers and entrepreneurs.

Contents
Measure Twice, Cut OnceSign Off On The Dotted LineAsk For A Down PaymentChange RequestsLegal MattersReward Early PaymentsInvoice On Time And ProperlyStart On The Right Foot

There are very few things that can frustrate a small business owner more than not getting paid in full for the hard work they do for their customers. With as many as 82% of small businesses ultimately failing due to cash flow problems, it makes sense that getting paid is top of mind.

Mistakes made during the client acquisition stage can be particularly challenging to deal with. From initial agreements about work scope to what gets included in a final proposal, oversights and omissions here can lead to cash collection headaches once the work is underway or completed.

Drawing on my company’s experience providing invoicing to millions of small business owners, I put together a list of suggestions on how to ensure you get paid in full for your hard work.

Measure Twice, Cut Once

The old carpentry saying “measure twice, cut once” is sage advice for anyone who wants to avoid wasting time and materials. Business owners who provide any kind of service, whether it’s a custom car detail or an exterior house painting job, should take heed. Make sure to listen closely to what the customer wants so you can fully document these requests in a statement of work or precise sales quote.

The more accurately you can detail the agreed-upon service beforehand, the better the chances you will not face any discrepancies in expectations in the future. It can also help avoid a situation where the customer may try to get you to do more than what was agreed to for the original price, a phenomenon some call “scope creep.”

Sign Off On The Dotted Line

It’s never a bad idea to repurpose the document you created for the customer and turn it into one they must sign. The document can be digital or printed and should provide a detailed description of the work agreed upon in addition to the customer’s signature.

Be sure that your document also includes details of your business such as your company’s name and contact information, so it is an official representation of your service offering. By getting a signature, it’s harder to dispute what was agreed to, and it will make collecting in full that much easier— provided you hold up your end of the deal, of course.

Ask For A Down Payment

For some businesses, especially where materials and supplies have to be purchased in advance, it’s customary to request a down payment before starting work. Professional consultants working on a project with milestones and multiple deliverables also often require an upfront payment to start the work outlined in a proposal.

Obtaining a down payment forces a customer into sharing the transactional risk sooner than if you bill them at a later date. It helps keep them committed to ensuring they do what’s necessary to help you get the job done right.

Change Requests

It’s not uncommon for customers to want to change the scope of the work that was agreed to, especially if it’s a longer-term project like a kitchen renovation or a website redesign. But be careful not to allow this without documenting the requested changes, or it could haunt you later.

I find that the best approach is to review any change requests by talking with the customer, taking detailed notes and discussing any associated fees. You can then turn your notes into a separate project scope document or add it to the existing work scope. Before starting on the new work, be sure to get the customer’s final approval and signature.

Legal Matters

Builders, contractors and subcontractors have what’s called a “mechanic’s lien” that protects them should a customer fail to pay. For service providers like bookkeepers or business consultants who typically work on longer-term engagements, there is no such industry-wide protection.

Because of this, I believe that knowledge workers like these would be wise to have an attorney review their proposal agreements to make sure they are using legally enforceable language. It’s rare that disputes lead to legal action, but making sure your sales proposal is airtight can prevent some customers from using loopholes in the agreement as an excuse not to pay you.

Reward Early Payments

There’s an old accounting trick companies play to increase the odds of getting paid. Cash flow is the lifeblood of a company, so some business owners will reward customers who pay early with a slight discount, usually between 1% to 3%. This approach can be an effective way to incentivize customers to pay what they owe and make them feel like they maximized their savings.

Invoice On Time And Properly

A final step in the process of getting paid in full for your work boils down to timeliness and invoice accuracy. Sending an invoice that includes your current company information, payment terms and payment directions (check, wire transfer or credit card) in a timely manner is key. A detailed, itemized invoice showing each revenue item will also help your customers better understand the invoice, reduce potential confusion and prevent payment delays.

Start On The Right Foot

Getting paid in full for your work is all about starting off on the right foot with each customer. How well you communicate, including everything from setting detailed expectations for work to handling unforeseen change requests, has a huge impact on the payment process.

Where possible, the use of down payments, discounts for early payments and legally enforceable documents can all properly incentivize customers to pay for the work they contracted. At the end of the day, making sure you get paid on time and in full comes down to accurate and timely invoice accounting. In my experience, ignoring this last step will inevitably lead to invoice collection problems down the road.

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News Room June 15, 2023 June 15, 2023
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