Effective billing and collecting procedures are essential for any business. Getting your invoices paid on time starts with establishing your billing terms with your customers. Your invoices should be prepared and sent in a consistent manner. Invoices that are not paid in a timely manner should be tracked for follow-up. You should have a clear understanding of when and how to use your local court for collections.
Establish Billing Terms
Your customers are more likely to pay on time when all billing terms are discussed and agreed to before any work is done. The essential terms to agree on are the price of your products or services, the date when payment is due, and the manner in which payment is to be made. The details of your agreement will depend on your business needs and what is customary in your industry.
Consistent Billing Procedures
Your business must establish billing procedures that you can consistently follow and that meet your customers' expectations. For example, if you expect payment upon receipt of a product, you must also deliver with the product an invoice with sufficient detail to clearly support the price. If you bill your clients once a month for your services, send the bill on the same day every month. Delayed billing will result in delayed payment.
Track and Follow Up on Unpaid Invoices
You must anticipate that some customers will not pay your invoices on time. Establish a method to track overdue invoices and follow-up procedures. A customer may fail to pay an invoice on time for a variety of reasons. Your first follow-up should be to call the customer to find out the reason for the delay. It may be just an oversight or perhaps a mistake was made on the invoice. Determining the reason will facilitate getting your invoice paid.
Use Your Local Courts for Collections
Filing a court case to collect unpaid invoices is not desirable, but may be necessary. To determine the right circumstances to file a court case, you must understand how collection cases are handled in your local court. Small claims court is often advantageous because no attorney is necessary and cases are decided relatively quickly. However, each state differs regarding its rules for small claims court. The most significant difference is the maximum limit for a judgment. Limits range from $1,500 in Kentucky to $10,000 in Illinois and $15,000 in Delaware. If a client files for bankruptcy, you must stop any efforts to make collections on outstanding debts. Going forward, you must join with other creditors to work with the bankruptcy court.
A Lawyer Can Help
The law surrounding business billing and collecting can be complicated. Plus, the circumstances surrounding your business are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact a collections lawyer.
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