A section of my book, Lessons Learned From Our Mistakes, discusses collecting money from customers, and this week I would like to elaborate on this subject. Caterers who love to get paid the minute the food is delivered may have to somewhat shift their mindset as they move more deeply into the corporate catering realm. Larger companies often demand payment terms that can, in some cases, stretch to at least 30 days; in other words, you may have to wait for your money.
Furthermore, payment is not automatically guaranteed merely because your corporate client has received an invoice. In order to avoid serious cash flow issues caused by faulty invoicing, follow these guidelines:
1. Always discuss payment terms and procedures with new customers as soon as the relationship has begun and absolutely no later than the time the first order is placed.
2. Never assume that the person who places the order will be responsible for actual invoice payment.
3. Find out if the company prefers printed or emailed invoices.
4. Ask if a purchase order is required. Some companies will absolutely not write a check unless your invoice includes a valid purchase order number. If you do need a purchase order number, find out who can give that to you and make sure you get it immediately.
5. Ask about W-9 requirements. Many companies cannot issue a check without a completed W-9 from your business.
6. There may be a vendor questionnaire that needs to be completed before a check will be cut. You may have to answer questions about the status of your business, i.e. minority or woman-owned.
7. Inquire exactly where to send the invoice. Many companies have A/R departments with specific addresses.
8. Get to know the person who handles your account. It is a lot easier to deal with problems if you have a direct line in to the person who can fix them.
9. Find out if your new customer requires monthly statements in addition to individual invoices. Some will not pay from an individual invoice alone.
10. Understand the company’s payment terms. Many companies will pay all of September’s invoices, for example, at the end of October. Therefore, you could legitimately have to wait 60 days for payment on an early September invoice.
In “How to Collect Money Faster: Part II,” I’ll discuss how to speed up the payment process to ensure that you have cash on-hand.
Michael Rosman is founder of The Corporate Caterer, a membership website, training and consulting company for caterers and restaurateurs and who want to launch, or grow their corporate drop-off catering business. Michael has over thirty years of experience in the industry and has built an almost two million dollar a year corporate drop-off catering operation from the ground up. Michael can be reached directly at: [email protected].