It’s funny, almost every one of us would celebrate making a sale – and so we should, it’s a big thing, but it’s not the whole deal and never forget that!!! Strong opening statement? It’s probably not strong enough…
You only have a complete deal when you’ve made a sale, done the work and then collected the readies. Don’t disillusion yourself into thinking that you’re doing amazingly well just because sales are being made – getting the money in the other end is just as critical and sometimes just as tricky
Its very easy when you’re new to business to let your clients get away with not paying you very quickly – don’t worry I’ve been there and done it myself. This, however is not a good strategy and will only leads to problems, here are just a few of them:
- The time you’ll waste chasing debts can become ridiculous – taking you away from your day to day work
- Clients can begin to ‘expect’ better terms
- Many companies have a ‘don’t pay until questioned’ policy – if you don’t ask, you simply won’t get
- As you get more established, older clients that have been with you since the early days will continue to pay you on the old terms you let them get away with – this is very hard to change down the line
- Clients will know those suppliers that are less likely to cause them problems when it comes to asking for money – you’ll be further down their priority payment list
- An aged debt is more likely to turn into a bad debt
If you’re about to start a business or are still fairly new to it all, make a strict policy for how you’re going to deal with the collecting of monies and stick to it.
Here are a few quick suggestions:
- Create regular statements – At least once a month – send your statement in the middle of the month when most other companies send theirs at the beginning or end, it’s more likely to get noticed.
- Try and make your statement stand out – We have a stamp with a picture of a man crying, saying ‘please pay this, it’s overdue’
- Keep a close eye on your aged-debtors list – At least once a month
- Don’t be afraid to ask for the money – after all, you did the job, you deserve it
- Have a process in place for chasing debts that are older than your terms
- Consider if you can minimise your risk of bad debts and cashflow issues by putting in place deposits or at least stage payments
- If the debt gets really old, don’t be afraid of losing a customer by passing it to a collector, are they really worth having as a customer if they are putting you through this? I hear you thinking, ‘but yes Al that’s fine but they are so important to my company, I can cut them a bit of slack can’t I?’
Seriously, it’s not worth the agro – get yourself a policy and make sure you stick to it religiously, whatever the size or importance of your client. No exceptions.
One last tip, if you employ sales people who are have any sort of commission, make it a condition of that commission that’s its only paid when the money owed from the client is in the bank. Give them the responsibility of getting the money in – this will make your life easier in keeping on top of aged debts.
How have you found getting money in? Do you have any further tips for business owners regarding this tricky issue?
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