Being an entrepreneur is incredible. You can pitch your company to interesting clients, see your brand awareness become bigger … You’re doing your own thing and making your own money, without a boss looking over your shoulder. That’s what’s being an entrepreneur is all about! Unfortunately, there are also some less incredible sides … for instance, when one of your clients doesn’t pay. Sadly this will happen at least once for every entrepreneur! In this article, we will discuss the steps you can take to make sure your debtor always pays you what you’re owed; both the steps you can take to prevent getting screwed over and the steps you can take when your invoices are getting ignored.
1. Have a signed, air-tight contract
Starting for new clients is super exciting, especially when they chose you over other competitors. But before you start working for them, it’s important to sit down with them and discuss important issues, such as payment terms. Make sure you write out all the details in a contract that leaves no doubts and let your client sign the contract. No signature = no activities! Also never rely on a verbal agreement, even when it’s your next door neighbor or someone your parents know from church. No matter how good you know someone or know someone’s reputation, always make sure you have a signed contract that clearly states your fee and the fixed payment terms. If necessary, you can use this contract in court.
2. Working on a big job? Ask for a down payment!
In certain cases, it’s a good idea to ask for a down payment. If you do a lot of work for a client or deliver many products, you can ask for a down payment as a sign of commitment and trust. When your client pays a part of their invoice upfront, they show that they have trust in you and probably won’t switch to a different partner somewhere in the future. Being paid out partially upfront helps your cash flow – especially when you get paid after a project ends instead of being paid out monthly. When you have a down payment, you also show that you will work your hardest for them.
3. Are your invoices not getting paid? Take action straight away!
We know – it isn’t fun to have to send payment reminders to clients you talk to a lot. But if you don’t get paid, you could get in trouble! After all, you also have to pay rent and need money to live. So if you notice one of your clients hasn’t paid their invoice before the agreed upon date, don’t wait to take action. Send a payment reminder after a day or two and give them a few more days to reply. If after that, you still don’t see the money on your bank account, we would recommend picking up the phone and talking to your client personally. They might not even realise they had not paid you yet! Often, invoices are forgotten or lost. It’s not always a sign of bad faith! When your client agrees to fix their mistake, set a new payment date and mail them after the call with the updated payment terms. If you notice that after your call you still haven’t received payment, you can prove you had this conversation with your mail correspondence. You can use collections insurance companies to insure your collections.
4. Get help from a debt collection agency
As an entrepreneur, there’s only so much you can do before you reach your limits. That’s when it’s a good idea to hire a debt collection agency (Dutch: incassobureau inschakelen). A debt collection agency (Dutch: incassobureau) knows all the legalities of collecting owed money and they’ve been doing this for years. That means they know exactly what to do to make your debtor pay. They also have means you don’t have, such as databases. Some collection agencies even work with lawyers, so they can sue your debtor. Because of all the laws regarding collecting money, this is pretty hard to do yourself. You don’t want to accidentally break a law and get sued by your debtor! If you want to find the best debt collection agency (Dutch: beste incassobureau) in your area, we recommend you to look at the Google reviews. Furthermore, take a look at their services. If they offer the ‘no cure no pay’-service, you don’t have to pay them if they are unsuccessful in recovering your money. This might be handy!
Good luck with collecting your debts, we hope you’re paid out soon!