Getting
your customers to pay their invoices and accounts that are due
to your business
When
small business owners take stock of their companies' year-end
finances, many undoubtedly get an unpleasant surprise, a pile
of unpaid receivables that have accumulated over the months.
In
such a case, there are two problems business owners must address.
They must get the money that are owed, and if there is a sizable
amount of receivables, avoid a similar situation in the future.
Getting
your customers to pay up can be dicey, especially if you want
to keep o doing business with them, said Eric Tyson, author of
"Small Business For Dummies." (For a copy of this
book, click on this link Small
Business for Dummies)
"You
have to be careful not to tick off clients or offend them in any
way, but still try to get them to pay," he said.
Of
course you are going to want to call or e-mail customers, but
before you start screaming, you need to find out why they are
not paying. Often customers don't pay because they are having
financial difficulties. But the problem might rest with your company;
perhaps your customer's non-payment is an expression of dissatisfaction
with your product or service.
When
a customer is struggling with cash flow and other problems in
the short term, you might find you need to compromise. Tyson said,
noting that "its better to get something instead of nothing."
Moreover in the case of a customer you want to keep, you will
engender plenty of goodwill by being understanding while they
are getting their finances in order.
Probably
the best approach is to work out a payment schedule with the customer.
If
its not money issue, "make sure its not something you
have done or that your employees did," Tyson said. And
if the problem is at your end, his advice is to "listen
non-defensively." (see footnote No.1)
He
recommends business owners make a real effort to rectify the situation
and, again, consider a compromise over the bill.
"People
are willing to shop around if they get lousy service,"
Tyson said. "Don't make the mistake of underestimating
the long-term revenue and profit potential of a customer."
Of
course, some people balk at paying simply because they are bad
customers. Once you have established that there are no other reasons
for their nonpayment, you need to decide if you want to go to
the expense of a collection agency, or the time and costs required
for small claims court. We use the services of "Online
Debt Collection Agency."
Tyson
noted that with bad customers, its probably no great loss if they
respond to your actions by turning to one of your competition.
So getting tough won't hurt you.
While
dealing with the unpaid invoices that have already piled up, you
need to look at your accounting system and determine how to avoid
the same mess going forward.
Some business owners are paid late simply because they don't get
their bills out on time. This can be a problem for entrepreneurs,
whose talents often lie more in building a business, not doing
the administrative chores. It's also a problem for people who
are disorganized.
Tyson
said some business owners might do better by requiring payment
up-front, in much the same way many doctors or dentists require
a fee to be paid at the time of service. This is also a way to
ensure that customers who are slow to pay don't fall behind.
Whether
you take that approach or use invoicing, you need to have a good
accounting setup that will help you track bills and let you know
wether you have been paid. Software designed for small
business can help accomplish that.(see footnote No.2)
If
you don't have the time or patience to deal with receivables,
you should consider getting outside help, such as a billing service.
(see footnote No.3)
How
to collect slow & problem accounts - Learn how to
protect yourself and your business from making bad credit decisions
that could cost you hundreds or thousands of dollars. Interregional
Credit Systems, Inc. is a full service commercial collection agency
recommended by credit managers nationwide. Read more on how to
Collect
your slow and problem accounts
There
are other, more strategic ways of improving your payment rate.
Tyson noted that in prospecting for new customers you need to
think about their ability to pay, and their past payment record.
That calls for a credit check, another expense, but again,
probably worth it to avoid headaches in the future. We use the
services of CreditReporting.com.
Plus another very useful business tool we use, which helps you
to find debtors and hidden assets is the Net
Detective
(This
material was adapted from an article by Joyce Rosenberg who writes
for the Associated Press)
Footnote
No.1. If you work with difficult, unpleasant customers or
employees, check out "the bible" on difficult customers. "Defusing
Hostile Customers Workbook". Buy
Conflict Prevention In The Workplace - The Book (Electronic Delivery)
or
Buy
Defusing Hostile Customers Workbook - Electronic Version
Footnote
No.2. We use and recommend QuickBooks software
for our bookkeeping and accounting requirements, and to use this
software proficiently, click
here
Footnote
No.3. Visit our web page on Financial Services, regarding
assistance in setting up a service which will help you control
bad debt, click
here
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