My advice is to have a very aggressive, disciplined cash collections process, as such:
- Get your invoices out on time. In fact, I say get them out early. I used to send invoices to builders even before we were finished with our work, knowing that they typically pay 45-60 days out.
- Be firm on your invoice. Make the due date clear and consistent. If you need to be a bank and offer terms, then getting this invoice out on time (i.e. early) is even more important. Be sure to include a little nudge, like “please remit payment immediately.”
- Give them a small grace period after the due date, but once they hit that date, send them a ‘nasty-gram’ immediately. Politely inform them that payment is past-due and that you expect payment in full immediately. This letter can be gracious and firm. And because it’s a letter, it is impersonal enough that it shouldn’t get in the way of your relationship.
- If the customer still hasn’t paid, then it’s time for a phone call: “Hey [name], can I stop by and pick up that check?” Friendly, but with a firm expectation of payment.