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A common problems operating any businesses is that your customers owe you money. When you've completed the work, but customers are slow to pay you, you can get behind with your own bills and be short of money to invest in your business.

This is, understandably, an difficult and annoying situation since you're being chased for debts that other people refuse to pay. There are, though, a few ways to improve how quickly your customer’s pay you.

Remember You’re a Credit Provider

When you complete a job and invoice afterwards, you’re extending credit to your customers. Therefore, it might be wise to consider running a credit check on a potential customer before you start work. This will show you whether the company you're about to do work for is in trouble or has a history of slow payment, and can help avoid problems if you take on their work. You can usually run credit checks online for a reasonable cost.

Give Invoices a Due Date

A mistake many home businesses make is to send invoices that have a fancy layout and say how much the customer owes, but the invoice doesn’t include any direct instruction to pay now. This results in customers receiving the invoice and putting it on their ‘unimportant chores’ pile — you know, the ones that never get taken care of for months.

To avoid this, a good strategy make sure every invoice you send out includes a due date. You can set it two or three weeks from the date you sent the invoice, or set it as due now, but just make sure you highlight the due date.

People will see your deadline and realize that you mean business — hopefully they'll think ‘oh, I'd better take care of with this’ and you'll get your payment sooner rather than later. If you don't, a follow-up phone call saying ‘I wonder if you realize your invoice’s due date was yesterday...’ will usually do the trick. Most people won’t refuse to pay if you confront them directly — they just do it because they think they can get away with it.

In some places, the practice of putting due dates on your invoices might even entitle you to charge interest on money you’re owed, or charge a late fee. Check your local laws.

You Could Try Debt Factoring

Some businesses have success with a technique called ‘debt factoring’. This is when you sell your invoices to a third party who specializes in administration and collection, and they give you the money for the invoice immediately instead of you having to wait for the customer.

If you try this approach, though, you should consider the percentage of your invoices that the company is taking, and whether they're treating your customers the way you’d want them to be treated. It might be best to only sell invoices to debt factoring companies when they haven't been paid by the due date, letting them act more like a collections agency.

Collections Agencies

Of course, your last resort is to sell the debt to a collections agency. This will cost you about 10% or more of the debt. The collections agency will try to intimidate your customer into paying, ultimately taking them to court if necessary, and they might try seizing the customer's assets. Make sure you check out the agency you plan to use beforehand, though — you want to make sure they don’t illegal tactics for collection.

You should always try to talk to the customer before you take this action. If they're not paying, chances are there’s a reason. You might be about to force them out of business. On the other hand, they might just be forgetful, in which case they won't be too happy about you setting debt collectors on them.

Be Prepared to Settle

Sooner or later, you might end up being owed money by a business that’s in financial trouble — you're just one in a long list of creditors, as everything collapses around them. In this situation, you need to be prepared to settle with them for less than the original invoice price, or you risk getting nothing. It’s a bad situation to be in, but it's better to give someone a break and get some money instead of pushing them further towards bankruptcy and getting nothing.