Reel.com founder and serial entrepreneur, Stuart Skorman, and longtime business owner John Muller, who had a Hoboken street named after him for his longevity, have at least one thing in common: they are bound by the necessity of billing clients and customers and waiting for payment. Whether you’re on your fifth successful startup, or just beginning your journey, the process of invoicing and collecting payments can often prove as difficult as getting the work accomplished. Balancing the client relationship and the need for payment begins with understanding the nature and organization of accounts receivable.

Entrepreneur.com defines accounts receivable as, “the money due from all customers for merchandise or services delivered on credit.” Management of this amount, shown as an asset on your company’s balance sheet, can make or break your company. Methods for managing accounts receivable differ as widely as business types; however, processes should achieve three objectives:

• Create a daily record of sales and receipts
• Generate invoices and statements on a recurring basis
• Track current and overdue balances on customer accounts

Setting up your accounts receivable process should encompass these significant issues:

Credit policies: Establish a credit policy and stick to it. Define the conditions under which you will extend credit, how much credit you’ll give, and to whom. Choose your preferred methods of payment, how you will determine credit worthiness for new customers, requirements for deposits, and interest charges on late accounts.

Last year, fraud costs businesses $8 billion. If your business accepts credit cards for payment, then you’re vulnerable to chargebacks caused by these fraudulent transactions. Setting up a fraud scoring system can help stop fraud before it starts, and save you time and money down the road.

Fraud scoring is a set of operating procedures and technologies that are implemented to identify suspicious transactions. If a purchase looks like it may be fraudulent, the system can detect it and either reject it altogether, or request additional authentication before the transaction is processed.

Good fraud scoring systems will measure the risk of the transaction by gathering and analyzing relevant information about the purchaser, including: the amount of the purchase, the IP address from which the transaction was made, the email address of the purchaser (free emails may be particularly worrisome), where the purchase is being made from, when the order is placed and what shipping options the purchaser is using.

After your fraud scoring system is setup, it’s important to tweak it as needed. Fraud is more prevalent in some businesses than others and you’ll need to adjust your system accordingly. Ideally, this is done through a fraud score, which takes a broad range of indicators and creates a single metric by which to judge the riskiness of a transaction.

The prospect of setting up a custom fraud scoring solution can be daunting, to say the least. Fortunately, there are many off the shelf solutions, like MaxMind, which are far more cost effective for small businesses.

One of the biggest drawbacks of running a service based business is that you only get paid for billable hours. After spending hours looking for clients and doing preliminary work, you only get paid for what you do. Whether you bill at $20, $50 or $200 an hour, your income is limited to the amount of hours you work. If you are smart, you can find a way to turn your services into products and make more money without having to work 80 hours a week.

If you offer a set of services that you feel you aren’t getting paid enough for but can’t justify raising your hourly rate, productizing may be your best option. You can offer your services as a package, with clear objectives and promises attached. The package could include a combination of several services you provide to make it look more appealing.

This is a strategy that many web-designers use. They offer a package that may include a specified number of pages, logo design, domain name registration and SEO marketing. Customers read these packages and feel like they are getting a great deal. But from your perspective, you may be making $75 an hour instead of $25. Your hourly rate will increase even further as you become more efficient.

The key to productizing services is to learn to work efficiently. Here are some tips:

1. Create a template. Make sure that your service can be easily duplicated. If you can automate the process,you will be able to produce your services much more quickly.
2. Make sure that your staff is well-trained. The faster they work, the more orders they can fulfill.
3. Look for new tools to improve efficiency. Always be up to date on the tools of the trade. New technology can make a process a lot faster. This is especially true for     high-tech companies and web developers. New software and CMS packages can let you do work in a few hours that used to take days.

Many entrepreneurs offer free products to help increase their customer base and encourage consumers to buy a premium product. Called “freemium,” these free products may sound like a good marketing strategy, but it may not be entirely effective.

Here are some reasons why freemium may not be the best marketing tool:

1. Freemium makes customers hesitant to purchase the product initially. Many companies that offer freemium find that less than 2.5% of their customers buy a premium version. This model can discourage customers from buying the product upfront.
2. Freemium can hurt a business brand. Most of a business’s users are probably going to be using the freemium version. When people ask them what they think of a product, they will give the opinion of someone using the lowest quality version of a product. These reviews may ruin a business’s opportunity to find paid users.
3. Free users can cost a company a lot of money. Some freemium products require you to store data on hundreds or thousands of customers. You may also have to pay for their bandwidth if they are frequent users. Your customers may actually become a cash drain rather than a revenue source.
4. Business-to-business clients often don’t respond to freemium. Businesses have larger budgets and are usually more interested in getting a return on their investment than getting a product for free. Most of them would probably rather buy a quality product than waste their time using one that doesn’t have all the features they need.
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Pricing products either online or in a store can be difficult to determine because most items have a set manufacturing overhead cost. Retailers need to find a balance so they don’t have too few customers due to overpricing or too little profit if they price their margins too low. Much of pricing boils down to trial and error, but a systematic and informed approach to those trials can help you find the “sweet spot” with a minimum of mistakes.

At the “10,000 foot view,” there are two ways to approach pricing. You can price your products according to how much profit you want to make, or you can price them according to what the market looks like.

Profit-Based Pricing

If you have 2,000 shirts that cost you $10 each and you need to make $24,000, profit-based pricing says to charge $12 per shirt. This assumes the $10 accounts for all of your expenses, not just the price of the shirt. This sort of strategic planning helps keep track of the bottom line, but sometimes the plan doesn’t mesh well with realities.