Protecting your revenue as a service provider

If you’re a service provider you are likely familiar with the often unpleasant payment cycle. You draft a contract that says, “payments are due net 30.” The other party agrees. You diligently perform the work and submit your invoice. You wait. You wait some more. And while time passes, your financial obligations as a business owner continue. You have vendors to pay and operational expenses to cover.

What do you do? How do you ensure you receive your payments in a timely manner?

Focus on relationships. Every strong contract begins with a solid foundation. That foundation is the relationship. Are you working with people you can trust? Did you speak to any prior service providers? What do they say about this individual or company? Did they complain about late payments? Is this an individual or company you envision yourself working with over the long-term?

Have a meeting. Whether virtually or in-person, schedule time to meet with someone at the company. Hammer out expectations.

Bad reputations travel, so ask around. It doesn’t necessarily mean you won’t work with them. It does mean you’ll put stronger protective measures in place.

Pay attention to your gut feeling. Rarely is that feeling entirely incorrect.

If the late payor is someone you’ve been working with a while and have established a relationship with, give them a call. Don’t just send the invoice and hope for the best. Ask them why the payment is late. Perhaps they are experiencing some difficulties. Suggest a partial payment to start with incremental payments until paid in full.

Negotiate a strong contract. Don’t just assume you have to sign whatever terms are placed in front of you to get the work. Yes, there are individuals and companies that will walk away if you try to negotiate more favorable terms. But are those companies you want to work with anyway? Not every opportunity is one that is worth your time and effort, especially if the company won’t even agree to put their payment obligations in writing.

Draft concise payment terms.

Ask for a percentage upfront.

Add penalties for late payment.

Understand what you’re signing. Ask questions. If you don’t understand it, consult with an attorney in your state.

Your business requires money to operate. You want to generate revenue through your services, and you want to receive that revenue in a timely fashion so you can be around for years to come.

#smallbusiness #serviceproviders #contracting #revenueprotection #riskmitigation