When you start a small business, you tend to run into small financial issues here and there. They may not necessarily be big ones; your business might be sound overall. However, there might be times when it turns out that money is a little bit tight, such as when you’re about to pay your rent or your employee salaries.
Collecting Money for Services Provided
Occasional money shortages can happen due to a number of reasons, the most common of which is that you just haven’t collected the money owed to you. This is especially true if you provide services to clients and then collect the money from them once the work is done.
How Much Time Do You Give Clients for Payment?
If, for example, you run a photography studio and rent photography equipment for large scale shoots, then it’s pretty common for your clients to pay you after the work is done. In order to make things convenient for them, you might also agree to receive your payment a few months after the work is done. This helps you to maintain a good relationship with that client and ensures that they’ll come back to you time and time again.
Getting Paid Within a Month of Providing Services
Giving clients too much leeway in terms of payment might interfere with your own ability to pay your overheads. In order to solve this problem, you might want to make it a rule that clients have a month maximum after the services are provided to pay their dues. Once in a while, if they really need more time and they are a regular client, you can make an exception. But if you keep doing this every time, then your business is likely to suffer and the people you have to make payments to will come to see you as unreliable.
Getting a Credit Card Number in Advance
Another way to deal with this issue is to make sure that you get a credit card number from the client before you provide them the services. And let them know that if they don’t send you a payment in the form of a check within a month of the services provided, you’ll charge the credit card.
Maintaining Relationships AND Getting Paid
Getting your payment in time might be a little bit tricky and has to be handled with some finesse so that you don’t end up ruining your relationship with the client. But making sure that you receive your payments on time will help you in running your business better.
Contact us to learn more about avoiding common business accounting mistakes.