What to Include in Your Payments Policy
Your payment policy should lay out when you will invoice people and how quickly you expect them to pay. It should also lay out your penalty charges for late payment, and what you will do to enforce your terms of payment. If you offer a service, your terms should clearly explain when you will cut off that service in the event of non-payment, and what a customer would need to do to reinstate service.
Enforcing Your Policy
Take a look at your accounts, and check who owes you money and how much they owe. Make a point of chasing the accounts that are past due. Instate a policy that will prevent new customers from opening up a line of credit before you credit check them. If a prospective customer has a poor credit history then you should ask them to put down a deposit before you sell anything to them.
Once all customers have been notified of your payments policy, start to enforce it consistently. Send a friendly reminder when a payment becomes past due, and follow a consistent schedule, send a second reminder, then a notification that you will pass the account to a formal collections team. Do not be embarrassed about using the full extent of the law to enforce collections. You are running a business and any respectable client will appreciate that. If a customer is not willing to pay what they owe, then they are not someone that you want to be dealing with in the long term.
Depending on the number of customers you have, it may be worthwhile outsourcing your collections work. Keep track of how much time and energy you have to devote to chasing late or non-payers, and think about how much money you could make in that time compared to how much outsourcing your billing and collections work would cost. Some industries have bigger problems with late payment than others, so you will have to make your own decisions about whether outsourcing is worthwhile, but do remember that there are other benefits to using third party billing – for example you could find that you look more professional if you have a big-name payment processor.