In an ideal world, collecting payment from clients would be as easy as pie, but unfortunately almost every business owner in Israel has experienced a situation in which payment was delayed or never came. Here’s what you can do to avoid these issues and deal with them when they crop up.
Be clear about payment terms
As a service provider, you will often encounter businesses and institutions with payment policies which favor the client and not the business owner. In these cases, you will hear the terms Shotef + 30 and Shotef + 60. Shotef refers to the end of the month, so you will be paid 30 or 60 days after the end of the month in which they receive the invoice. In practical terms, you might collect payment almost 3 months after completing the work.
You can, of course, refuse to work with clients who hold these policies. However, that might not be practical in certain industries or a project might be attractive enough that you are willing to forgo immediate payment. If this is the case, make sure that you understand clearly what the terms are and that you send your invoice as soon as possible. Ask if you can send it before beginning the work or split the payment into installments so you are paid sooner.
When working with clients who don’t have clear payment policies themselves, delineate your payment policy in writing. Let them know when you expect payment and if there is a penalty for paying late or a discount for paying early.
Clients who pay late
There are always going to be clients who take their sweet time paying for the services you have provided. Reminders about outstanding bills may be helpful, as well as offering to accept payment in installments, if it seems that the problem is financial. Another option is to stop further work or refuse to hand over what has been done until payment is received.
For ongoing clients, if they are often late, consider switching to a system in which they pay (in full or partially) in advance before you begin the work or end your agreement with them.
Clients who refuse to pay
A much worse problem than clients paying late is those who just don’t pay at all. Sometimes they say they will pay but never do. Sometimes they denigrate your work and say it wasn’t up to their standards, for the sole purpose of avoiding payment. As aggravating as it is, if the sum is small, it may not be worth pursuing. However, if the amount is significant, you can submit a request for collection to Hotzaa Lapoal (the execution office). If the client doesn’t respond to the claim, the office can take measures like freezing his bank account to pressure him into paying. In a case where the client denies the claim, you may have to escalate and take him to court.
Vet clients in advance
Because payment issues can be devastating to a business, it’s a good idea to find out in advance if a client is reliable and trustworthy. If you know someone who has worked with them in the past, they can tell you whether payment was received in a timely fashion. Well-known businesses are less likely to renege on deals, but more likely to have unfavorable policies in place. Individuals and other small businesses are a wild card, unless you’ve ascertained from others that they had good experiences working with them. Also, trust your instincts. If a client seems slippery or overly critical, chances are that payment issues will pop up later on. If you have a bad feeling about a client, don’t take them on.
New business owners often struggle more than experienced ones with payment issues. That’s because experience has taught those who’ve been in business for a while who to trust and how to safeguard against non-paying clients. Nonetheless, it’s hard to eradicate the problem entirely, so a certain amount of time must be devoted to chasing after clients who owe you money.