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You’ve poured passion, time, and money into fulfilling a contract, have agreed on payment terms and invoiced your customer—and then nothing. Days turn into weeks, and you still haven’t received payment.

For sole proprietorships and small start-ups, uncollected invoices can sink your business. Suddenly, you’re cash flow negative. Income you needed to cover expenses and pay vendors dries up. Without the safety nets larger companies enjoy, small businesses often face bankruptcy when a large client refuses to pay.

Wondering how to tip the balance of power in your favour? Try these strategies to get paid quickly and avoid non-payment.

Have customers complete a credit application form

Prepare a Credit Application form to give to customers who want to purchase on credit. This form should require the customer to provide their legal identity and contact details. They should also provide at least three contactable references, such as existing credit suppliers. Contact these references to find out how reliable the customer is at paying on time.

The customer should sign the credit application to certify that the information provided is correct, and that they agree to your terms of sale. You should provide your terms of sale together with your credit application form. It may be worth your while to obtain advice from a commercial lawyer to draft legally binding terms of sale.

Without a satisfactory credit application your customers should only purchase Cash on Delivery!

Send a collection request right away

It is absolutely crucial for entrepreneurs to follow-up on unpaid invoices quickly, just a few days after the payment date is missed.

Contact the debtor by phone to confirm they received your invoice and remind them that it’s past due. In many cases, your client has simply neglected to review their accounts payable and is behind on their bookkeeping.  Agree on a new payment date and follow up again if it is missed.

It is also possible that your customer is struggling with financial difficulties. Be reasonable and suggest a payment plan. It is better to collect installments than to receive no payment at all.

Be persistent and firm, but always polite. Harassment and escalating threats typically get the entrepreneur into trouble, while yielding little from the debtor.

Remind your debtor that late payments come with a cost

You may be able to recover interest and other costs of late payment if your debtor has agreed to these in your terms of sale. For these to be binding your customers will need to agree to these terms before the sale occurs.

If your debtor won’t respond to your reminders, send their accounts payable department a “statement of account” that includes:

• the date of the unpaid invoice
• a description of goods or services provided, for which you are awaiting payment
• the total amount due, including applicable interest

Proceed with legal action

Have 30 days come and gone and you’re still getting nowhere with your unpaid invoice? Sometimes, all it takes to motivate a reluctant debtor is an official letter from a lawyer or legal body. If your income level is below stipulated levels, you may even qualify for free legal aid.

It’s important to note that in some cases, it makes more sense to write off uncollected invoices as “bad debt” and absorb the loss. For example, if it is clear your debtor no money to pay you.

When it comes to dealing with debtors, the key is to respond quickly to a threat of non-payment and follow up consistently until you’re paid. It’s also wise to consult your accountant or a trusted business adviser to tailor your strategy to protect your business.