Published on 18/05/2018 by Any Business.Com.Au

The Small Business Owner: How do I make sure I get paid?

Trying to recover debt from customers or other businesses can be stressful and time consuming. You can reduce the risk of having unpaid invoices or bills by doing some homework before you start work.

Here are some suggestions that can help you prevent unpaid debt.

Know who you're dealing with

Before you enter into an agreement with other businesses, ask the right questions and do some research.

Find out as much information about their business, operations and finances as you can. Knowing that the business is legitimate and solvent may increase your confidence in dealing with them.

• Check the Australian Business Number (ABN) details of other businesses that you deal with to make sure they're a legitimate and still in operation.

• Check the ASIC registers to confirm that the information you've been given is true. You can report a business to ASIC if you think they're acting illegally.

Have a signed contract

Put any agreements in writing so everyone can refer to it if there's a dispute. Always seek legal advice before creating or signing a contract, as there may be important information that you don't fully understand. An example of this can be costly early termination fees.

Create a good invoicing system

Having a good invoicing system plays an important role in collecting money.

• Ensure your invoices look professional and are easy to understand.

• Research each payment method that you offer other businesses and your customers when paying for your goods and services. It's important to choose payment methods that meet the needs of your business finances, as well as your customer.

• Set payment terms and have payment policies in place to help ensure that you receive payment on time. Make sure everyone is clear about timeframes and expectations for payment or read our setting payment terms topic.

• Make invoicing a regular part of your business activity. This will not only help with your cash-flow, but you'll be able to keep a track of your clients more easily.

Understand your rights

An important part of running your business successfully is understanding the laws that apply to debt protection. Make sure you're up-to-date.

What to do when you haven't been paid

Getting paid for the work you've done can be challenging. Most of the time, having a polite and professional conversation with the customer can help clear up any misunderstanding.

If this doesn't help, there are other measures you can take to recover money owed to you.

Review the terms of your contract

If you have a written contract, the first thing to do is to read it carefully to check the payment conditions and debt recovery options you have under the terms of your contract.

If you have an oral agreement or part oral/part written agreement, these are just as valid as a written contract if there is proof of what was agreed.

Send a reminder

A missed payment could just be a general oversight. Get in touch with your customer to give them a reminder, discuss a payment date or negotiate a payment schedule. You can do this by phone, email, letter or in person.

Put it in writing

If your customer hasn't responded to reminders, send a letter of demand, or talk to your lawyer about drafting one up for you.

Be aware that you have legal obligations when contacting other businesses regarding debt.

Tip: Getting a lawyer to draft a letter of demand may prompt a quick payment.

Get help with dispute resolution

If other methods haven't worked you may need to get help to resolve the issue.

Mediation is a common form of dispute resolution where you and your customer work with a mediator to reach an agreement. If you're still unable to reach an agreement, lodge a complaint through your state or territory's Fair Trading agency. They can act as an informal negotiator.

Outsource to a debt collection agency

If you can't recover the debt after friendly reminders, informal negotiations and a letter of demand, you might decide to engage a debt collection service.

Tip: Let your customer know that you plan to pass the matter over to a debt collector. This may prompt them to pay the debt prior to further action.

Take legal action

When all other options have been exhausted, you may consider taking legal action.

Depending on the amount of money in dispute, you can seek legal advice or lodge a claim with the Small Claims Tribunal.

Find out where to go for legal assistance on the Australian Small Business and Family Ombudsman's website.

AnyBusiness.com.au

Curtis is a leading expert in the business-for-sale industry, serving as a senior content creator at anybusiness.com.au.

With a career spanning over fifteen years, Curtis has accumulated extensive knowledge in the domain of business sales, acquisitions, and valuations. His deep understanding of market dynamics and his ability to translate complex industry jargon into accessible insights make him a trusted resource for entrepreneurs and business owners looking to buy or sell businesses.

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