As Seen In …
Why did you start your company?
If I had to guess, it could be for any number of reasons. Your boss was an idiot. You wanted to make a difference in the world. You wanted to work in a collaborative spirit with other people, instead of always watching your back. You wanted creative expression.
And if I had to guess, you didn’t start your company because you like making dunning phone calls. Following up on outstanding invoices. Or listening to B.S. excuses for why your “check is in the mail (again).”
Collections are a lousy fact of business. If you’re clients don’t pay you on time and in full, your profitability takes a huge hit.
So you need to have a plan.
In my early years in business, I was shocked when clients didn’t pay on time and in full. (Okay–naïve too, but shocked). “What did I do wrong?” I wondered. “Wasn’t the client happy with the service I provided? After all, I swooped in, saved the day, and got them their pound of flesh. What’s going on?” I’ve had clients who paid my invoices like clockwork again and again suddenly disappear without paying their last bill. Past performance is an indicator—not a guarantee–of future behavior.
So how can you minimize the chances that you’ll be cheated?
First, have a contract that anticipates past-due receivables. Insert collection terms—like interest or late payment penalties–into your services contract. While that still doesn’t guarantee payment, having terms in writing makes your case easier to prove in court if it gets to that point.
Next, have a collections system outside of your contract. This includes:
- An invoice schedule. The longer you wait to bill a client, the greater the chance they will question payment, or ignore you altogether. Invoice on a regular schedule and adhere to it.
- Persistent follow-up. For a small business owner, it’s hard to sell to clients AND collect from them. You have to be tactful if you want to retain their business … but if they don’t pay, what does it matter? Be polite – until polite proves not to work. But mostly, be persistent.
- Keep track of receivables. Stay on top of your accounts. When you make those collection calls/emails, you need to accurately state the amount owed and how long it’s been overdue.
Have a plan; work your plan; and your plan will work.