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In this episode, we tackle one of the biggest challenges facing small businesses: getting paid on time. Late payments can disrupt cash flow, strain vendor relationships, and hinder growth opportunities. We explore practical strategies for setting favorable payment terms, shortening payment cycles, and using technology to streamline the invoicing and payment process. Whether you're a freelancer or a small business owner, this episode provides valuable insights and actionable tips to help you optimize your payment terms and maintain financial stability.
Connect with Keila!
LinkedIn - https://www.linkedin.com/in/keilahilltrawick
Website - http://www.hellokeila.com
RESOURCES:
- (00:00) - Introduction: The Challenge of Timely Payments
- (01:39) - The Impact of Late Payments on Small Businesses
- (03:17) - Common Industries Affected by Late Payments
- (04:38) - Strategies to Optimize Payment Terms
- (06:20) - Leveraging Technology for Efficient Payments
- (06:58) - Ensuring Accurate Business Information
- (08:15) - Importance of Following Payment Instructions
- (11:17) - Final Tips and Conclusion
Connect with Keila!
LinkedIn - https://www.linkedin.com/in/keilahilltrawick
Website - http://www.hellokeila.com
RESOURCES:
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Creators & Guests
What is Build to Enough ?
Little Fish Accounting presents Build To Enough. The pursuit of endless growth and scaling can leave entrepreneurs feeling burned out and unfulfilled. This podcast explores how to build sustainable, purpose-driven businesses that align with your lifestyle and values, rather than defined by rapid expansion alone. On this show, we’ll reframe definitions of success, provide strategies for structuring companies around desired lifestyles, and share stories of entrepreneurs finding deeper fulfillment by focusing on “enough.” Join us as we discuss moving off the hamster wheel and building businesses with balance and meaning.
There may be errors in spelling, grammar, and accuracy in this machine-generated transcript.
[00:00:06] Keila Hill-Trawick: Hello. You're listening to Build to Enough, a podcast for [00:00:10] entrepreneurs who want to scale at their own pace. I'm your host, Keyla Hill Traywick, and I'll be your chief storyteller and cheerleader in a world that glorifies endless expansion, we're tuning [00:00:20] out the noise and discussing the beauty of enough. Each episode will dive into inspiring stories, practical insights, and strategies to cultivate sustainable success on your [00:00:30] own terms. So whether you're a solopreneur, small business owner, or aspiring entrepreneur, get ready for a refreshing take on the entrepreneurial journey. This is build to enough. [00:00:40] Today I'm talking about one of the bane of most small businesses existence, which is getting your money [00:00:50] on time. Now, there's a lot of reasons why money might not come in at the same time that you were expecting it or hoping for, but we can't talk about some ways that we can make that [00:01:00] easier for ourselves, for our clients, and for our bank accounts. We're going to talk about how timely payments impact cash flow, financial stability [00:01:10] and just in general, your overall business success. Um, unless you're running a nonprofit and even when you are running a nonprofit, we're not doing this for free. Things cost [00:01:20] money. And we need to make sure that the money that is coming in is timed up really nicely with the expenses that go out, and that is because we have things to pay for.
[00:01:29] Keila Hill-Trawick: And so [00:01:30] we want to make sure that we know how much we can afford to spend, even when the money doesn't come in exactly when we were expecting it. So let's get started. So [00:01:40] first let's go to the bad. So let's step into the bad side and let's talk about the impact of late payments. When you get a late payment from a client or customer, [00:01:50] it can be detrimental to a small business. And if you're listening and you support small businesses, just understand the impact that not paying your service provider on [00:02:00] time could have. It disrupts cash flow, and when it does that, it can hinder operational efficiency. If you don't pay or if you don't get paid on time, [00:02:10] your ability to pay your team, pay for software, um, pay all the cost for the tools that you need to do are really put behind. Not to mention things [00:02:20] like travel if you've got to go somewhere, so you're paying for something in advance of actually taking advantage of it. There's got to be money there for you to be able to do that. It can also strain [00:02:30] your vendor relationships. When you are paid late, you pay people late, and their patience for that is going to wear really thin, really fast because they're in the same situation [00:02:40] as you are. When there are delayed payments, you also delay every other payment. So when it comes time to pay bills, you have [00:02:50] to make some priorities around who can get paid with the money that's actually in the account.
[00:02:54] Keila Hill-Trawick: And that may mean that some don't get paid or get paid late. There's increased borrowing [00:03:00] costs because the more you're late, the higher your interest rate ends up being. And you can miss growth opportunities when there's not cash available for you to invest in making your business [00:03:10] more scalable or more efficient, then you kind of have to work with the inefficient ways until you can afford to make the upgrades. Where do I see this most funny enough [00:03:20] accounting firms? And why is that so? Accountants are notorious for charging after the fact, meaning that they do the work and then they charge [00:03:30] their clients to pay them afterwards. Not great for cash flow. It can mean that you're working your busiest season before you actually get any money in. And it can also [00:03:40] mean that you're producing a delivered, uh, a deliverable or a delivered product that isn't paid for in advance. Now, there are some ways that accountants have gotten [00:03:50] around that they will not submit on your behalf, or they may not allow you to sign. And maybe you can just view and not edit. This also happens in some design companies, although they [00:04:00] are much less likely to allow you to pay after. But what is the consequence? Well, it means that at the end you can spend a whole lot of time [00:04:10] chasing down payments, a whole lot of space, reminding people that they owe you.
[00:04:15] Keila Hill-Trawick: It can even lead to some negotiations that you weren't planning on having. People can look [00:04:20] at what you provide for them at the end and say, hmm, I don't think it should cost that much and start thinking through whether they want to pay what they agreed to. And so [00:04:30] there are some real consequences to getting paid after the fact, and how that can delay when you actually get paid anyway. So how [00:04:40] can we optimize payment terms so that we don't fall into this position? I would say the first thing is set favorable payment terms with clients to begin with and [00:04:50] set reasonable expectations. Everybody should know exactly what they're walking into. One of the things that we get praised on a lot is that there are no surprises. [00:05:00] There's no nickel and diming around like, oh, you added this and you didn't know that that was going to be an extra charge. So setting those expectations at the beginning about what people can expect to pay, [00:05:10] when they should expect to pay, what those deadlines are going to be and what the consequences of not paying are going to be is going to be very important. I would say the [00:05:20] next thing is shorten your payment cycle, get paid as soon as you possibly can.
[00:05:25] Keila Hill-Trawick: In the instances where you can get paid in advance, make that the requirement and where [00:05:30] that doesn't line up with your business. Maybe make sure that there are milestone payments that are expected to be paid. The worst possible outcome for most small business owners is to not get [00:05:40] paid until everything is done, because the truth is, you have expenses along the way, whether that's tools or equipment or just software. You are paying for things as [00:05:50] you do the work that you have to pay out even though you haven't gotten any income in. You also want to be really clear about invoicing practices. When should people expect [00:06:00] to get an invoice? How long do they have to pay? Again, what are the consequences of not doing so? How can they pay you? You don't want to tell people at the last minute [00:06:10] that they can't use a credit card, if that's how they were expecting to pay the whole time. What kind of information can you provide at the onset so that people are prepared to make payment when the time comes? [00:06:20] I would also say use technology and automation tools. No more do we have to make PDF invoices and send them via email with information on how to pay [00:06:30] us? There are so many different platforms out there that will allow you to send it.
[00:06:35] Keila Hill-Trawick: Take the payment on your behalf and then direct deposit it to your bank account. [00:06:40] Is it more expensive? Sure, they got to get paid to write, but it takes the responsibility off of your plate because there are automatic reminders. There is automatic [00:06:50] deductions that people can sign up for. So you don't have to be the person that is stepping in at each point to make sure that people give you your money. The next thing is [00:07:00] to make sure that your business information is accurate. So alongside using some of those automations, how can people pay you? Do you have your [00:07:10] business name and tax ID that matches up to what you are actually asking to get paid for? Now, this happens a lot with freelancers and very small businesses [00:07:20] where they will give a name that they want to get paid at, right? But it turns out that they don't have a business in that name. That's just kind of what they're [00:07:30] going by. And we actually need to pay their real name and their real Social Security number. Make sure that the document that you're providing lines up with that, so that there aren't any delays [00:07:40] in when you get paid. The next thing is if there are any discrepancies for your business information. So let's [00:07:50] say that the Ein doesn't match or the bank account numbers don't match. You're going to get paid late by the time it actually gets processed through somebody's system, and [00:08:00] it's recognized that something is in error.
[00:08:02] Keila Hill-Trawick: It may be 15, 30, 45 days beyond when you were supposed to get your check. So make sure your information is correct [00:08:10] at the beginning so that by the time somebody goes to pay you, it's really easy for them to do so. One of the things that I've seen come up a lot is people not [00:08:20] following instructions on how they should get paid, right. So you're a small business and you're working with another business, and they say you have to submit your [00:08:30] invoice via this portal and you email it to your point of contact. It can take a long time to get paid. That way you are waiting for somebody else to sign [00:08:40] off on it. You may be emailing the executive assistant when it really needs to go to the finance department. You may be emailing the person that's working directly with you, even [00:08:50] though it needs to be approved up a chain, and that's why they're telling you to put it in a system. It won't always get you paid early, but it can make sure that you've done all [00:09:00] you can to make sure that you've submitted at the right time. This also, and especially applies when there are specific cut offs. So most businesses have a day or a time of [00:09:10] the month when they are specifically going to literally or figuratively cut the check.
[00:09:15] Keila Hill-Trawick: And so you need to make sure that you've submitted all of your information accurately [00:09:20] and timely to the place that they asked you to do it, so that when they hit that cut off, they can process yours in that batch. I've seen people who have had to wait excessively long times [00:09:30] because they submitted it. They company went to cut the check. It was wrong. And now you have to wait until that next batch gets processed. Could be in another 1530 days. [00:09:40] Now let me stop here and say it is not fair for people to pay you late. I am not giving an excuse for the idea that a company or a client could come in and just pay you whenever they want [00:09:50] to. You have terms for a reason and people should be abiding by those. But I've also seen a lot of instances where these simple rules weren't followed. And then there was [00:10:00] a lot of uproar about those payments not being made on time. Be really clear about how you want to get paid, and also be really clear about the rules [00:10:10] that they have put in place around how they will pay you. And again, that is for freelancers, small businesses who are working with other businesses, same things with people [00:10:20] who are working directly with clients. How should people be paying you? Can they send you checks? Can they pay by credit card? Do they have to click on a certain link, or can they submit [00:10:30] through a system that they used earlier? Be really clear about how this process should work, so that you can avoid any confusion that would lead to delays.
[00:10:38] Keila Hill-Trawick: The other thing [00:10:40] that I would say is have penalties. There's a reason that you've said that you want to get paid in a certain period, and people have agreed that they will pay you. So [00:10:50] there's nothing wrong with adding late fees with not completing certain parts. If it's within your rights, within your contract, you are not responsible for doing [00:11:00] a whole situation and not getting paid for it. So have a strong contract to begin. With. We'll make sure we have a lawyer on to talk to you all about that, because I am not one. But [00:11:10] I do know the importance of having a document to support what you will do and what term's need to be met in order for you to continue. I would say the next thing is make sure that you're [00:11:20] managing your cash flow appropriately. If people pay you late, you need to be prepared by having some cushion in place to cover you until you get your money. Maintaining [00:11:30] cash reserves and diversifying revenue streams. Make sure that you have cash in the bank, that you have money to continue to run your business, even when some [00:11:40] or more than some of your clients are not paying you on time.
[00:11:44] Keila Hill-Trawick: And then finally build strong relationships so that you know who to go to when something goes wrong. You [00:11:50] want to be able to reach out to somebody when something says paid, but you don't actually see it in your bank account. You also want to know exactly who to turn to when something when an invoice is [00:12:00] overdue, or if you're waiting for payment that has been promised. It is your responsibility to do what you need to do to get paid and have terms [00:12:10] and boundaries and penalties in place for when those are not met. Really, small businesses need all their money, and I'm not saying [00:12:20] that large businesses don't, but we all know it affects us in a different way. It's direct to our livelihood because it's not going through a ton of layers before it hits somebody for whom [00:12:30] it matters. And so you want to implement proactive strategies for optimizing payment terms, getting people to pay up front or at specific points throughout the [00:12:40] process, not waiting until the very end to get paid, and setting that expectation from the time that people sign on with you. Setting terms and having a contract to enforce those terms [00:12:50] of when you'll expect to get paid and what happens if you don't.
[00:12:53] Keila Hill-Trawick: And finally having money in the bank to cover you for those times when it just doesn't work out, you can do everything [00:13:00] right. That doesn't mean that everyone's going to pay you on time, but you can make sure that you're not overworking yourself while you're waiting for payment. Where there are areas where you can [00:13:10] stop or modify work based on what you've already got paid. That is much easier to do when you've already gotten some money in the bank than when you're waiting on somebody to give you cash at the end. [00:13:20] Finally, make sure that you're providing accurate information and really clear terms. If you want to get paid on time, tell people how you want to get paid, where you have the power and [00:13:30] where you don't have the power. Follow the instructions on how you get paid so that you don't have to wait any longer than you need to. To get the cash, you need to cover the expenses of your business. [00:13:40] Thank you so much for listening. We'll talk next week. Thank you for tuning in to another episode of Build to Enough. If you enjoyed today's episode, don't forget to subscribe, [00:13:50] rate and share the love with your fellow entrepreneur friends, and make sure to sign up for the Build to Enough newsletter. The link is in the show notes. Stay tuned for more episodes as we continue to redefine [00:14:00] success one intentional step at a time.