Small businesses are often revered as the cornerstone of the economy, but starting up a small business is no small feat either.
When it comes to conducting partnerships and receiving payments from small businesses it’s important to know who you’re dealing with, considering 51 percent of small businesses go under in their first five years, according to the U.S. Small Business Association.
It’s important to note, however, that the 34 percent of small businesses that do survive after their ten year mark are strong and tend to stick around for a long time.
When dealing with small businesses in their beginning years, follow some of these steps to ensure you’re receiving your payments on time:
- Require up-front payments– Until the customer establishes a good reputation with you and proves that making payments on time is not an issue, consider requiring the payments before your goods have been received.
- Offer down payments– If an up-front payment isn’t going to work for you or your small business partner, require a down payment of at least 50 percent. Make sure that your contracts and invoices state your right to discontinue business if the work is not paid for.
- Offer discounts for early payment– If you’re unsure about a small business partner, give a discount to the business in return for an early payment. Give the customer a call or shoot them an email and exchange the discount for payment that day.
- Be aware of “trouble” signs– Have you suddenly stopped receiving emails or phone calls? That could be a sign that your customer’s small business is facing troubled times. A sudden discontinue of communication is an early warning sign that you may not be receiving your next payment. If you see trouble ahead, try to get all outstanding invoices paid.
- Use an automated accounts receivable software– One of the fastest and easiest ways to ensure you will receive your payments on time is by using an automated accounts receivable software. Collectors no longer have to look up old emails, invoices details and other information. Everything is on one screen. The automation solution will send out emails on time with copies of invoices and predefined templates for each phase of the collection process. Learn more about automated accounts receivable software here.
In the end, the easiest solution may just be giving that new, small business a little nudge to help them navigate their way and keep them from falling behind on invoices.