Thoughts from your Systems Goddess, Sandye Linnetz, Process Prodigy
You made the sale! Congratulations, but you're not through yet. No sale is complete until payment has been collected. No, really. Having that signature on the bottom line is great, but without receiving the payment for product or services sold, you haven't made a sale. A sale is a transaction; a deal. It requires that there is performance by both the seller and the buyer. Nice to do your part… Vital that you ensure that the buyer is also holding up his end.
An astounding number of small business never bother to get paid! (Talk about money hiding in the system!) Hard to believe that some businesses don't do follow-up in an area that is so essential to their operation, but that's the way it is. Yes, it would be great if all of our customers paid us as promised – without our monitoring of them – it just doesn't always happen that way. Sometimes customers forget to pay, lose the invoice or their funds are tight…and sometimes they just don't want to pay! Unless you have an effective system in place for handling and monitoring collections, consider that YOU HAVEN'T MADE THE SALE!
If you want to stay out of the debt collection business – and I assume that you do – there are a few simple payment collection methods to consider:
• COLLECT PAYMENT IN ADVANCE
• ASK FOR PARTIAL PAYMENT IN ADVANCE AND ASK FOR A CREDIT CARD OR POSTDATED CHECK FOR THE BALANCE
• SET UP DIRECT AUTOMATIC PAYMENTS FROM THEIR ACCOUNT TO YOURS
• REQUIRE PAYMENT IN FULL AT TIME OF DELIVERY OR SERVICE
Let's assume that you have not chosen to do use any of the methods listed above, and instead you either trust that payment will be made or send out invoices and statements. Now what? Step one is to have your account information recorded in a way that makes it quick and easy to see who owes you what… and since when. There are numerous accounting programs available to help you record and track monies due. You do, however, need to do constant updating or even the best program won't help you. Unless you are a one-man-band, assign one person to be responsible for accounts receivable. Have that person be accountable to you… with monthly status reports and bi-weekly updates. You should be aware, at all times, of what monies are due into your company.
Next, decide how delinquent you are willing to have a customer be before you initiate collection. Often it will make sense to do this within a day or two of the bill being payable. The longer you wait to call the longer you will wait for payment.
Remember, this is a call to simply remind the customer that a bill is due. Make sure that you are speaking with the person who is actually in a position to pay bills; the person who handles accounts payable. Check to be sure that, if you sent an invoice or statement, it went to the correct person, and verify that the address in your records is correct. Afterall, we sometimes make mistakes, too. If you start out with an inquiry call (e.g. Did you get the invoice?), rather than a demand, you are allowing your customer to pay without upset. A friendly reminder that allows your customer to save face may be all that it takes to get paid. And, hey, it could have actually been an honest mistake. Be sure to record that you made contact – with who and when payment is expected.
Obviously, if the inquiry call doesn't work; if your customer has a long list of excuses and won't be pinned down to a by when date for payment, or if the new promise to pay date has passed, a demand for payment is the next tactic. A demand doesn't have to be – and shouldn't be – a threat. You supplied a product or service and your customer agreed to pay for it. Now you are letting your customer know that you want to be paid immediately. Ask for a credit card payment over the phone. If this isn't acceptable, get a commitment from your customer for an agreed upon date for payment to be received.
Follow up the phone call (usually the most effective means of collection) with an email and/or letter. Send a customized, personal letter, not a form letter. You can create a number of templates and customize them as necessary. As part of your system, these will be in your computer; ready to customize and send. Remind the debtor of his or her original promise to pay, and ask for full and immediate payment. Just don’t wait too long between contacts. Again, RECORD all pertinent information and agreements in your accounts receivable program.
It is extremely important to age your accounts receivables, i.e., 0-30 days, 31-60 days, more than 60 days. (If more than 20 percent of your billings are more than 30 days past due, immediate further action is necessary.) If you are doing bi-weekly updates, nothing will fly under the radar and you will know if payment agreements are being met.
There are times when negotiating your charges will be the only way to be paid. Naturally, you will ask for payment in full, but you may have to negotiate down or take a partial payment immediately and create a new payment plan for the balance. You may even consider a discount if there is an immediate payment in full. Again, record and track all payments. Staying aware of what is due… from who… and by when… is the most efficient way to be sure that your money is lost in the daily minuetea of selling.
If you don't get the desired results from your collection efforts there is always a collection agency. Frequently, just getting a letter from them, and the threat of bad credit, will get you a payment. Small claims court is another possibility if all else fails. Yes, non-paying customers are a problem and a nuisance. Your job is to stay in contact with them and collect what you are owed. By staying in constant contact – through phone calls, emails and letters – you may at least be the first in line when they are ready to pay bills.
There is no greater priority than collecting the money that is due to you. The only really good customers are the ones who pay their bills on time, and the only good sales are the ones where you get what’s coming to you.
© 2009 Beth Schneider, Process Prodigy, Inc. Want to reprint this article? Feel free as long as you include the following: Beth Schneider, President of Process Prodigy Inc., www.processprodigy.com, along with her team of highly sought after operations consultants, reveal the insider secrets billion-dollar corporations pay thousands of dollars for. Specializing in process creation, Process Prodigy tools and techniques have helped entrepreneurs increase productivity by as much as 600%, and revenues by as much as 250%. Visit www.processprodigy.com/ezine and grab your FREE systems starter kit valued at $297.00.
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