According to the December 2009 report from commercial credit bureau Coretera, more than 18 percent of Hawaii businesses closed the year being owed money. Hawaii ranks ninth among states with the highest rate of businesses with past due accounts receivables.
Delayed or missed payments can hurt a business's bottom line and cause a similar domino effect throughout the entire business community. To help local businesses avoid being left holding the bag for customers and clients with unpaid bills, Hawaii's BBB offers the following tips to speed up the payment process:
- Sign a contract. This may seem obvious, but is critical if you want to set payment terms up front. Do not rely on verbal agreements. Your contract should stipulate what you will do, when you will do it, and how much and when you will be paid.
- Decrease the number of days in your billing cycle. While most vendors can take up to 60 days or more to pay up, there is no reason why you can’t add a line to your invoice that reads, "Payment due within 14 days," or the length of time that fits your accounting schedule. Include a specific date for the amount to be paid.
- Review your invoices. Are your invoices too generic? All invoices should include the client's contact name, the order number and the date the bill is due. If you are dealing with a large corporation, ask for a vendor number and include it on the invoice. It is often required before a check is cut. You may also consider adding a late payment penalty charge to your invoice.
- Request a portion of the payment up front. Depending on your business, you often can request part of the payment in advance.
- Bill your clients more often. Instead of billing every 30 days, try billing every two weeks.
Cortera Past Due by State report, December 2009