Good times or bad, in order to run a good business, you have to be diligent about collecting your money. The collection process starts the first day the customer decides not to pay on time. I have been on both sides having run healthy companies and having turned around a Chapter 11 company. The ruder the people were the further down the pay list they went. However, if someone was willing to work with me, I would try my best to get them at least some money. Some general collection policies are important in these difficult times.
1. Have a 30 day, 60 day, 90 day reminder letters prepared, and send them out religiously.
2. As an owner of the company or decision maker do not make the first calls. Otherwise, you are immediately on the spot to start negotiations and have no room to strategize what the next step should be.
3. If you are too small to have one person in charge of Receivables, assign a person for 1 day / week just to make friendly reminder calls. They should have a set script on what and how to ask for money. Give them a specific range of responsibility where they can either write off, or mark down without your permission.
4. A weekly report should be made on what actions should be taken by whom and when. Make sure there is a clear understanding of why the customer says they have not paid.
5. Make sure that if there is an agreed date of action that your Recievable person follows up with a phone call and an e-mail. The consequences have to be clear on what the next steps are, if the customer has not followed up on the agreed terms.
6. If a customer promises to write a check and they are in the area, your representative should offer to come by and pick it up. Do not wait. This will also give someone a chance to fairly assess the condition of the client. Do not threaten if your company cannot follow up with the threat.
7. Never hesitate to visit one of your better past clients to discuss the issue and what can be done to rectify. Be calm, understanding, but firm in your desire to get paid. Ask them to communicate better their difficulties rather than not pay.
8. Discounting receivables is not a good idea, because then the customer will expect it every time. Only discount, if you feel that this is not a customer you want to do business with in the future. However, payment plans are a better way to go. Use phrases like “I know times are difficult, but as an act of good faith”.
9. Avoid using collection agencies and lawyers as much as possible. They are not only expensive, but the results are scattered. If you need to take a tougher stance, ship COD with partial payment of past bill included. Or, tell them that you hate to see them get a bad credit report which infers a collection agency.
Allan,
Your advise to "Colect that money" is right on target. As an owner of a small construction company I agree with you that money collection shoud be a priority even it is the most un pleasent aspect of any business.
Avi kagan
AZ Enclosures and Sunrooms
Posted by: Avi kagan | June 17, 2008 at 05:59 AM
Greetings
In my small lawn care business I don't have too much of a problem with people paying. My problem is, when you have a product or service that is a small or low end dollar amount that doesn't come in all at one time but trickles in, you have to do some really detailed accounting. I have to disect every check and assign a few dollars here and a few there. My friend started an ice cream francise and was asked, just how many ice cream cones are you going to have to sell to make it? Obviously a lot. His advise to me...sell a lot of "ice cream cones."
Posted by: Bill Losh | January 15, 2009 at 09:08 AM
Hi Bill,
I appreciate what you are saying. Have you tried to get several months payments upfront. Give them a 5% discount or just ask. This means less paperwork and chasing, and better cash flow.
Posted by: Allan Himmelstein | January 15, 2009 at 05:50 PM
Hello I find very interesting information from this blog, as it brings important information, I share with you a page of information to me to get noticed
Online Marketing
How did internet affiliate marketing get started? The concept of money affiliates for advertising began over a decade ago when large internet companies came up with the idea of using individual websites to place promotional materials. The web site owners were rewarded every time the sponsors earned business through these ads.
http://www.moneyaffiliateprogram.net/
Posted by: online marketing | March 20, 2009 at 04:24 PM