How to get your clients to pay up what's owed

By Joyce M. Rosenberg
Associated Press

NEW YORK — When small-business owners look at year-end finances, many undoubtedly get an unpleasant surprise: a pile of unpaid receivables that have accumulated over months.

In such a case, there are two problems that business owners must address. They must get the money they're owed and, if there's a sizable amount of receivables, avoid the same problem the next year.

Getting your customers to pay up can be dicey, especially if you want to keep doing business with them, said Eric Tyson, author of "Small Business for Dummies."

He said that "you have to be careful not to tick off clients or offend them in any way" but still try to get them to pay.

Of course you're going to want to call or e-mail customers but, before you start screaming, you need to find out why they're not paying.

The problem might rest with your company: Perhaps your customer's nonpayment is an expression of dissatisfaction with a product or service.

If the problem is at your end, Tyson's advice is to "listen nondefensively." If it is on their end, the best approach is to work out a payment schedule.

Of course, some people balk at paying simply because they're bad customers. Once you've established that there are no other reasons for their nonpayment, you need to decide if you want to go to the expense of a collection agency, or the time and costs required for small claims court.

Tyson noted that with bad customers, it's probably no great loss if they respond to your actions by turning to one of your competitors. So getting tough won't hurt you.

While dealing with the unpaid invoices that have already piled up, you need to look at your accounting system and determine how to avoid the same mess going forward.

Some business owners are paid late simply because they don't get their bills out on time. This can be a problem for entrepreneurs whose talents often lie more in building a business, not doing administrative chores. It's also a problem for people who are disorganized.

If you just don't have the time or patience to deal with receivables, you should consider getting outside help, such as a billing service. You might find that the expense will be justified by a more even cash flow.