Monday, February 14, 2011

The Battle Against Slow Payers

Having trouble getting paid by customers? These services may help.


Small businesses and solo entrepreneurs are increasingly turning to online services to help with one of their most fundamental issues: getting paid.

As the economy has foundered, many entrepreneurs' cash-strapped customers have been slow in paying their bills. So, small businesses are using online options to make billing and payment as seamless—and hard to avoid—as possible.

Some are using services that streamline invoicing, while some turn to third-party providers that ensure payments are made promptly. Meanwhile, others are trying to head off payment problems before they arise by checking potential clients' credit history over the Web.

Of course, there are risks to relying on Web services. Just as office computers can crash, so can hosted applications, affecting many companies simultaneously. Last June, thousands of small businesses lost access to their online QuickBooks accounts for 24 hours when a power outage at Intuit Inc.'s San Diego data center knocked out service. Intuit said no data were lost.

But some small companies find that the services are worth the potential technical headaches. Here's a look at some of these online options and how companies are using them.

An Accurate Record

One key to getting paid is sending an invoice that clearly documents the work done. Many small companies are using specialized invoicing services that automatically track billable time—simplifying the job of record-keeping for businesses and reducing potential disputes with clients.

Marian Phelan, president of Hashrocket Inc., a Jacksonville, Fla., software developer, says her firm started using in 2009 because it made it easy for company programmers to click a button on their computers whenever they were doing work for a particular client.

The system then compiles that billable time into an invoice, and users can enter additional items such as expenses. also offers a less stressful option for managers who hate dunning their customers. "You can set up automated reminders to remind clients if an invoice is past due," says Danny Wen, co-founder of the New York-based site, whose services start at $12 a month. "Then it's the application doing the reminder—not the person. It makes things less awkward."

Other sites, such as oDesk Corp., of Redwood City, Calif., offer similar ways to automate record-keeping and lower the chance of disputes. When contractors get a job through oDesk, the company installs software on their computer that takes screen shots every 10 minutes to prove that the contractor is working on the job.

Guaranteeing Payment

Some sites that link up contractors with clients, like oDesk, Elance Inc. and Zintro Inc., also help ensure bills get paid promptly. Zintro, for instance, collects payments from customers in advance and puts them in escrow until the work is completed. The site, based in Waltham, Mass., charges the client 30% of the job cost as a fee, which the company says is comparable to the charge companies pay for an executive search firm. What's more, if a freelancer and company develop an ongoing relationship, they typically start to deal directly with each other.

Stuart Lewtan, president of Zintro, adds that the site has a binding arbitration process for resolving disputes, but he says they are rare.

Greg Buczynski, an accountant in Chicago, lists his forensic-accounting skills on Zintro. He says when a New York hedge fund approved four hours of work he did for them, he was delighted to find that Zintro had put the money in his PayPal account before he even sent off an invoice.

Looking at Background

Before taking on clients, many small companies are trying to get an idea of how reliable they are. To meet the need, credit bureaus have developed more-affordable alternatives to traditional credit reports.

For example, Dun & Bradstreet Corp. has a "summary credit report" covering a single company for $59.99 that customers are allowed to view for six months. Along with gauges showing the risk of late payment and recent payment trends, the report includes a business profile with annual sales and a listing of court judgments and legal filings. Experian PLC, headquartered in Dublin, offers a similar basic report on a single business for $29.95 and year-long monitoring for $99.

For a free answer, small businesses can go to Cortera Inc. The Quincy, Mass., company has a community of subscribers who report their experiences with payments from businesses. Jim Swift, president of Cortera, compares the system to consumer sites like that let customers rate restaurants and dry cleaners.

As for the possibility of a company's competitors giving false reports, Mr. Swift says, "We're very limited in what you can say free form. We monitor narrative comments."

Mr. Swift adds, "Communities tend to be self-policing," and Cortera will remove inaccurate information.

The ratings are free, but Cortera also aims to attract customers to more-sophisticated services. It charges $5 for a basic report on a single business, which includes a payment history with number of bills reported 45 or 60 days late, as well as legal judgments against a company and other information. For $99 a month, subscribers can get daily alerts on changes in payment patterns, news stories and legal issues for all their customers.

Anita McKinney, controller of Luttrell Belting & Supply Co., a conveyor-belt-distribution company in Memphis, Tenn., started subscribing to the $99 service last year and checks on all new customers. "Our cash flow won't allow us to carry customers with a tendency to slow-pay," Ms. McKinney says.

"With a couple of potential customers we said, 'We can't give you credit. Pay cash or give us a credit card,' " Ms. McKinney says. The customers agreed to the terms.

She adds, "They're not necessarily people who are out to do us wrong. It's just they're struggling like many people are to keep their business going."

Mr. Bulkeley is a writer in Boston. He can be reached at

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