BUSINESS CORNER
without alienating the customer. Once your business defines and documents standard procedures, the information can incorporated into paperwork provided to new clients. Often in the excitement of closing a sale, it is tempting to gloss over amounts due and invoic- ing schedules, but clearly articulating these terms before finalizing the agreement can prevent many potential misunderstandings down the road. In this challenging economy, it is quite common for vendors to
A
request full or partial payment at the point of sale. My dentist's billing clerk always asks, "How do you wish to pay today- cash, check or credit card?" This is the absolute best way to handle the situation. Remember, after service is rendered or the item for sale is released, your business no longer has the same leverage with the customer. Accepting credit card payments is critical, so sign up for a mer-
chant account with Master Card and/or VISA. Be sure to educate customers regarding this payment option. Service fees are deducted for credit card transactions, but can be built into your prices. The relatively small costs pale in comparison to time spent following up, chasing checks or paying a high percentage of the amount due to a collection agency. In some industries, it's not unusual for payment to be rendered
only after a customer sees the finished product. This is especially true with services provided by building contractors. Nevertheless, materials still need to be purchased and labor paid on a weekly basis. The prudent contractor will request an advance and periodic draws as a project advances, with the balance due upon comple- tion. At the very least, enough money to cover your materials and operating expenses should be required up front before any work begins. In instances when it is deemed necessary to extend credit terms
to a client, make sure that clear and concise invoices arrive promptly with itemized charges. Clearly state that payment is due either upon receipt or before a specific date, and include a self- addressed return envelope. Always remain professional and document each communication with clients regarding payment. It is extremely important to age your company's accounts receiv-
able: 0-30 days, 31-30 days, and 60+ days past due. First, focus your collection efforts on the largest amounts owed, followed by the old- est open invoices and work backwards. Some businesses add a serv- ice fee for late payments; however, this may only encourage the cus- tomer to delay payment and will not help your current cash flow. If after 60 days past due, you still haven't been able to
PULSE MAGAZINE ---------- 26
COLLECTING PAYMENT WITHOUT ALIENATING THE CUSTOMER
lthough a delicate subject, the process of collecting money can be handled in a variety of effective ways,
communicate with the client regarding a payment plan or other resolution of their dept, it is time to consider a collection agency. Before turning over the account, mail a customized, personal note - not a lifeless form letter. Remind the debtor of your original agree- ment, reiterate how your company completed the job or service requested, and firmly request full and immediate payment. If there is still no response, call every other day for updates or stop by the client's office or storefront in person. Collection experts say a phone call is ten times more effective than a letter or email. A sur- prise visit can also work wonders! Finally, don't overlook the power of an operating budget.
Note specific dates of recurring bills and other expenses (Accounts Payable), and also money owed to your business (Accounts Receivable). Although the balance between the two won't always be predictable, an accurate budget provides a snap- shot of your company's cash flow so you can plan accordingly. It might seem scary to risk losing a client with aggressive
collection techniques, but here is something to keep in mind. A client that does not pay is NOT a client worth holding on to! Your business is entitled to be compensated for products or services rendered within 30 days of invoicing. Don't let personal feelings get in the way of your collection efforts or fear appearing too pushy or desperate. If the roles were reversed and your company failed to produce payment in a timely manner for a client's product or service, would they just let it slide? Highly doubtful. Therefore, your client's should be held to the same standard with no exceptions!
ABOUT THE WRITER:
Gray Poehler is a volunteer with the Naples Chapter of
SCORE, a nonprofit organization that offers free counseling to America's Small Businesses. To learn more about management issues facing small business today and SCORE's Workshops,
call 2394300081 or visit
www.ScoreNaples.org.
Questions for the writer may be directed to:
http://tinyurl.com/askscore
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