Cash flow, or the lack of it, is an issue that impacts heavily on many small business owners and in a lot of cases, could well be the reason that so many of us get stressed or lose sleep at night.
At one time, I personally could have been accused and found guilty of being a bit soft on people who owed me money. I fell for that notion that said I shouldn’t chase money too hard in case I might lose a customer. I reasoned that a customer is everything and even if they paid horrendously slow, I couldn’t afford to lose any.
I followed that thinking for a long time but not any longer, I have since learned that some customers just aren’t worth having and it’s better to let them go. I have also developed a very different approach to collecting money that is owed to me and I’d have to say, doing something that I once thought could be detrimental to my business has proved to be the exact opposite, very beneficial.
Some years ago at a time when NSW was in severe drought, I was asked to participate in a number of Drought Seminars to be held in towns around the west of the State. My role was to present a talk on marketing while there was also an accountant there who was asked to speak on financial matters.
One of the things the accountant hammered home to those who attended was this “if you raise an invoice, collect the money”.
This lady explained in no uncertain terms that when you deliver a service or supply a product, you deserve to get paid, and in a timely manner. Put simply, she said “if you raise an invoice, collect the money”.
She went on to explain that “it’s your money” and you’re perfectly entitled to ask for it.
At this point I won’t go into all the different ways that business people reason that they should treat their debtors, I’m sure you can review your procedures for yourself. What I would like to do is tell you what I do and let you consider if anything I’m doing might help you get paid quicker.
I’ll try to keep things reasonably brief and let you fill in the blanks. If you need further information or would like to hear viewpoints from other members, please use the contact us facility and we’ll include it in our Brain’s Trust.
The best way I’ve found to get paid sooner rather than later is to be regular and consistent and to always do what you say.
Our procedure is this –
We offer 30 day accounts to appropriate customers. (Because we operate in a regional centre and have a reasonable knowledge of the local business community, we don’t generally do formal credit checks but tend to size people up on face value and then follow our gut feeling. As silly as this may sound, in our case we have an excellent track record.)
If we have any doubts or believe that to proceed with caution is the best way forward, we ask for payment with the order.
We send invoices and statements out at the end of the month. About 75% are emailed, the remainder posted.
If an account remains unpaid at the end of the 30 days, apart from noting the next statement as overdue, we ring the customer within 7 days asking for payment. My accounts lady makes these calls.
We repeat this each week until paid and have no qualms about making a nuisance of our self. Until an account has been paid by the customer, we have, in essence, made no sale and no profit.
This process also generally gives us an indication of any potential problems. Talking to people person to person also gives you a feel for not just what they are saying, but what they are meaning, if something else like simply telling porkies.
We consider each case on its merits and depending on the vibes my accounts lady is getting, I may then get involved. I may email the customer or ring them depending on what I consider appropriate. Sometimes just my saying the account has landed on my (the boss’s) desk and I’m concerned gets the job done but from this point on I do whatever I believe it will take to get paid. I too have become quite adept at making judgements about whether what people tell me can be believed and trusted or whether it’s just lies.
What I have learned in all this is –
1) Good people will generally not want to flag the fact that they are unreliable or can’t be trusted. They may stall and pussyfoot around a bit but we generally get to the point where, unless they pay, they run the risk of showing themself to be something other than honest and reliable.
2) Bad payers will string you out as long as they can so the more you “bother” them, the sooner you’ll get paid.
3) Nothing beats getting on the phone to the customer or right in their face. You’ll likely get to the point where they’ll pay your account because they simply don’t want to hear from you…again!
4) By doing this regularly and consistently, your customers will know what’s coming and pay you ahead of others just to keep you off their back.
5) A customer who does not acknowledge and appreciate your right to ask for your account to be paid in a timely manner is a customer you may not want. Sooner or later their true colours may show up and the cost to you may be far greater than you imagined.
6) I haven’t used a debt collector or gone down legal channels to get paid for years. My experience, when I have done that in the past (because that was what you did??), has been anything but satisfying. The cost, frustration and any outcome using that method, I just found it to be something I wasn’t comfortable with and beside, the methods I use today have proved to be far more fruitful and feel more noble.
On a broader note and with this experience added to may others, my policy now is to always try to deal with GOOD people, be they a customer of mine or me as a customer of theirs. My theory and experience is that you can always work things out, no matter how bad the situation is, with a good person.