Receivables

An unpaid invoice is a loan you did not agree to make, at zero interest, to a borrower you did not credit-check. Most people running small businesses know this and still find chasing payment uncomfortable, because it feels like begging for money that is already theirs. Understanding why it feels that way does not fix it; a process does.

The process is dull and it works. Agree payment terms in writing before the work starts, so the conversation happens once, early, when nobody is annoyed. Invoice the day the work is done, not at the end of the month — the single cheapest improvement available to most businesses, because an invoice raised three weeks late is money that arrives three weeks late no matter how good the terms are. Then a fixed reminder ladder: a polite note before the due date, one on the day, one a week after, and a phone call after that. Every step written down in advance so nobody has to decide in the moment whether today is the day to ask.

Two things worth knowing. Ageing your receivables — sorting what you are owed by how long it has been outstanding — usually shows that a small number of customers account for most of the problem, and those are the ones to deal with individually. And a customer who consistently pays sixty days late while you pay your suppliers in thirty is not a good customer; they are financing themselves with your money. That may still be worth it. It should be a decision you made, not one that happened to you.