And without cash flow, there is no business.
Regardless of what type of business you run when you sign on a new client it’s always a day of celebration however clients that don’t pay in a timely fashion or in rare cases don’t pay at all, can be more trouble than their worth.
It goes without saying that if a client doesn’t pay you may have to fire them, but sometimes even when they regularly don’t pay on time could be a reason to let them go. Saying no to business is always difficult but when it comes to your bottom line your cash flow needs supersede a clients.
Establishing clear invoicing guidelines and payment deadlines up front with any client is extremely im might not pay on time portant, so they know how you’ll collect on late payments. But sometimes no matter what you do you’ll have difficultly getting paid.
Here are 5 warning signs that your new client just.
1. No Set Accounts Payable Department
Sometimes smaller companies have people that perform a number of different duties. This doesn’t automatically mean they aren’t going to pay on time but it could be a warning sign. If they have a number of things they are responsible for, paying bills can often become a low priority.
It’s important to know up front who is in charge of accounts receivable and make sure you have a method for contacting them directly.
2. Failure to Send Contract Back
Often in setting up working with a new client a contract will be created, that sets terms not only for how you will conduct business with each other but also terms of payment. Not all businesses require contracts but anytime you can create one it’s worthwhile as it starts any business relationship off on a strong foot of solid communication.
If they contract is not being signed promptly this could be a sign that they won’t be prompt with other activities such as payment. Sometimes businesses are focused on their trade and paperwork becomes a necessary evil that they tend to put off and this can include payment of bills.
3. Method of Payment
What is there selected method of payment? If you aren’t taking credit cards you should absolutely consider doing so, as you can keep a clients credit card on file and bill them as you go. There are fees involved but this could be worth it as you get paid quicker.
Clients that pay by check can sometimes use this as an opportunity to create their own grace period and sometimes won’t put the check in the mail until the day it’s due meaning you’ll get it a few days later.
4. Response to General Communication
Whether it’s email or phone, how quickly clients return your call or email can be an indication of how responsive they’ll be with other things. This doesn’t mean that they don’t value you as a vendor but often business owners will focus their energy on their clients rather than vendors.
Just like you they are intend on getting paid in a timely manner and aren’t always as anxious to make payments. If you leave a phone message and don’t get a call back for a few days or email and hear nothing for a while this is definitely a good indication that you shouldn’t expect timely payment every time.
5. Request for Invoice Paying Deadline Extensions
When you setup terms for invoices you’ll have your standard terms that you’ve used for clients. If they immediately start negotiating on this point this maybe a sign that they aren’t going to be paying on time.
Obviously it’s important to service your employments and work to meet their needs and sometimes extensions are ok but if this is a focus point for a new client it’s likely a good idea to keep an eye on how punctual they pay their invoices moving forward.
As with any new client it’s important to give them a grace period so you learn how they do business as far as communication and payment. With any new client the new relationship you are establishing needs to work on both sides.
Look for these early warning signs that your clients may not pay you on time. It’s better to take action early on in the relationship. You don’t want months to go by where you are providing a service or sending products to your clients without them paying.
But it does happen and it happens more than most people realize. It’s easy to want to believe people when they have excuses, but it’s usually better to pay attention to their actions like the ones above.
Hopefully this helps you with your cash flow management.
If you have any to add we would love to hear in the comments!