Online Business: Ensuring You Get Paid

Running your own online business, whether as a retailer or service provider, can be incredibly freeing. You no longer have to follow orders from a boss, and your income is directly affected by your efforts, capabilities (and of course, luck.)

However, it also means an end to that steady paycheck and an added element of risk when it comes to your payments. Use these tips to minimize bad debts and to ensure timely future payments.

Follow the Rules

If you work as a freelancer through online marketplaces and bidding sites, such as Elance, Odesk or PeoplePerHour, it can be tempting to take up clients on offers to conduct business off-site in order to avoid the site’s fees. However, that leaves you open to scurrilous practices such as non-payment.

While these sites do take a cut of your fees, they also offer payment protection, escrow services and the ability to ban clients who cause problems.

Keep Accurate Records

Good record-keeping is essential for any kind of business, from tax records to applying as a borrower for business commercial loans. However, online sales often require added records.

When you ship items to customers, ensure you provide a tracking number to protect yourself against chargebacks for undelivered goods. Selling on eBay requires added steps for the best protection, including very detailed item descriptions and ideally photographs or video of the item as it is packaged. It takes some extra time, but you may well be thankful for your added efforts when a dispute is filed.

Have a Contract

For service providers, a contract is essential before you start work. A contract doesn’t need to be very complicated, and there are numerous standard freelance contracts available online that you can edit to meet your needs.

You should have the payment terms clearly stated so there is no reason for confusion or error. Don’t forget to include a kill-fee — that kicks in should the client decide to cancel the service halfway through your work — and penalty fees for late payment.

Consider Deposits and Installments

Clients will almost certainly prefer a payment system in which they only have to send you money when the whole project is completed. However this leaves you in a very vulnerable position should they decide not to pay.

Many freelancers structure their payment schedule to require an initial deposit with partial payment of the balance upon reaching various milestones.

For example, 50 percent upfront followed by 20 percent on delivery of an initial piece of work and then the balance on final delivery. At the very least you will have received some of what you are due.

Chase Down Debts

If a client or customer does not pay their bill, don’t give up. Often a strongly worded email along with an invoice that contains a late-payment fee can prompt a client to pay their bill. Contacting the Better Business Bureau or a local equivalent can also help.