Am I setting myself up for potential trouble down the line?

[jncc]

Hello. I am a sole trader and currently employ no one else, though I may well have one or two others on the team before this year is out. We're quite small, anyway.

In March I had five clients, so five invoices are going out this week. From last August to this February I mostly only had one client, and they only got themselves up to date about a month ago, having spent a while being three, four and then five months behind. They continued to use our services and I had no reason to think they wouldn't pay (and I was right in the end).

But now with five clients to think about, and possibly several more to come next month, I wonder if I am heading for trouble. We provide a service, and bill monthly. There is no formal credit application process that I put clients through - they can just use us for free right away and then I bill them at the end of the month.

I have basically no recurring expenses to worry about (apart from my personal ones, I mean) - something like £10/month would cover the lot right now, so cashflow isn't a huge problem.

I am, however, not very good at getting money from people. I've even refused days' wages in other jobs before because I didn't feel like I had earnt it. And money I lend to friends "just until Monday" might remain outstanding for years.

Do you think I should more formally examine clients before offering them credit?
Should I, from the outset, levy the 10% interest mentioned in my T&C on any outstanding invoices?

Any other tips? Or maybe there's nothing to really worry about?

Most invoices are worth £10-£50 by the way, so it's not a lot of money.

Thanks

 

[appyammer]

what do you do for £10-£15 a month?

 

[saxondale]

Or maybe there's nothing to really worry about?

don`t believe everything you read on the net ............. and stop worrying

 

[jncc]

don`t believe everything you read on the net

 

[jncc]

what do you do for £10-£15 a month?

Not very much at all

 

[See Web Solutions]

I imagine this is a recurring amount every month?

In my case I charge a monthly fee for web hosting if the customer dosent pay me the service is pulled meaning their website goes down.
I then charge £10 admin fee to re-activate the hosting.

This is clearly expressed in my T&C's and I hardly ever get customers defaulting on payments. Sometimes you have to be harsh.

 

[wickedinternet]

That's almost not worth the time of manually doing the invoice.

 

[George76]

I think you must remember this is a business. You have outlined the costs associated with your services and they must pay you for that service. It sounds as if you are selling yourself a bit short, these people want what you offer, that's why they chose you!

Is it right that you are not seeing the customer face to face?

If you have their telephone number I would ring them if they do not pay within say a week or two, a friendly reminder and ask if they are happy with the service when the job is done and you issue the invoice to them.

As for late payment charges, a lot of companies claim they can do this but don't. It can make getting payment harder for you. Have you thought about perhaps building into your price a bit of money off for payment within a week? It may encourage people to settle up quickly as people like to think they are getting money off rather than respond to being penalised for late payment.

 

[Philip Hoyle]

If you're doing the same work every month, i.e. a hosting fee or similar that never changes (except for occasional extras) set a monthly price for each customer and get them to sign a standing order form then just do manual invoices for the occasional extras.

For £10-£50 per month, it just isn't worth faffing around with working out what you have to bill them, raising invoices and then having to chase the money. You'd be better just having a set fee of say £25 on a retainer basis - you may do more for some clients than others, or you may do more for a client some months and less in others, so just average it all out for ease.

If that really won't work for you, then redesign your business model so that each customer "buys" each service via your website and shopping cart then get upfront payment by paypal or worldpay, or open a credit card merchant account yourself.

Raising and chasing invoices, giving credit etc is sooo "yesterday" - it only really works where everything you do is unique, i.e. selling one-off items of furniture or motor cars, etc., or you are doing lots of separate services which are all different, such as a solicitor. Standing orders or payment in advance via credit card is the future and will save you loads of time which you can spend more productively and preserve your cash flow.

 

[jncc]

This is an old thread, I'm not sure why I made it!

The same two clients are both 5 months behind again, but they'll pay eventually.

I don't really want to bill in advance, since what we do is courier work - so it's not simple to do that. Some companies do it that way, however - clients buy credits up front and they are deducted as and when they use the service. The company can promise to buy back any unused credits at any time, should the client wish to stop using them.

However, for clients that pay promptly I don't want to inflict this upon them - and I don't want two separate systems in use, so it's one or the other.

 

[14Steve14]

I think that the only problem you have is your late paying customers. They are a pain, and seeing as though the balance is small its a job to know what you need to do. I would personnally just keep phoning them and asking when payment is coming. If you dont like asking them, write to them in a polite way, asking for payment. You may be beter off using the late payment legislation, rather than your 10% interest, but use it cautiosly as a threat if you do not plan to charge it.

You can carry out some form of business checks if you wish, but these are not always good.

 

[jncc]

I see these clients up to three times a week, so plenty of opportunity to prompt them. Frankly I can't be bothered to, though. They'll pay eventually.

 

[14Steve14]

I see these clients up to three times a week, so plenty of opportunity to prompt them. Frankly I can't be bothered to, though. They'll pay eventually.

How do you expect to get paid if you dont ask for it.

 

[jncc]

How do you expect to get paid if you dont ask for it.

I would not expect to get paid if I didn't ask for it. However, I do ask for it - they receive invoices each month.

 

[ash2792]

You should have a contract written down that will state that the person will be charged at the end of the month in exchange for your work. This way they cannot complain.

 

[matt.chatterley]

I am, however, not very good at getting money from people. I've even refused days' wages in other jobs before because I didn't feel like I had earnt it. And money I lend to friends "just until Monday" might remain outstanding for years.

Without meaning to sound harsh (it's early, lol) - you need to get better at this if you're running a business, or plan to keep running one.

That doesn't mean you have to rule with an iron fist, but you need at least a rough policy - and to be consistent with people.

Remind them a few days before the balance is due, send a reminder if it goes overdue, etc - and have a contingency plan to deal with 'non-payment'. Ultimately, having a simple system will be easier, less stressful - and quicker - to administer than having no system.

And if you've done the work they're supposed to be paying for - shouldn't they do their bit? It's your money!

 

[Wholesale-Dealer]

their is nothing really to worry about and if are not able to satisfy your self that contact some business expert

 

[internetspaceships]

I see these clients up to three times a week, so plenty of opportunity to prompt them. Frankly I can't be bothered to, though. They'll pay eventually.

Ever heard the expression "casting pearls before swine?"

 

[sharecentre]

In that case I would do what George76 suggested and incentivise people to make a timely payment. Write to them saying that if they settle up all outstanding payments by the end of september then going forward (from october) you will offer a 5% discount for all bills paid within a week of the invoice date. For new customers increase the price by 8% and offer them the same terms, to cover the potential loss.

 

[cody44]

No Matter how small or large you really need to get all clients to sign an agreement. Sure we have all been stung in the past. I will get all clients to sign an agreement and I wouldnt so much use it to take them to court but if I thought I was going down that rocky road I would most certainly point them to the agreement.


Mark