Accounts, Invoices and Collections – Be Tough

When I was first starting out I was very eager to please. I still am, but not to the point where I would start losing money because of it.
In the early days if one of my clients asked for an account (that is, so they can pay later) then I would pretty much always give them one because I was so eagar to please.

I learnt the hard way that people will not always pay their bills regardless of what you do, but you can minimise the risk. In this article, I’ll show you how you can make sure you get paid and why you should be tough.

In todays day and age in just about every business will one day accept either credit from a vendor (such as your suppliers), or give it to their clients.
If you are providing credit to your clients you need to have a good system in place to make sure you get paid and dont lose customers. Here’s my system:

1. First of all, dont lose your customer. Its not always possible to avoid this, but if you dont manage the collection process properly you can make previously good client not want to do business with you again.

When following up outstanding client debt, always be polite. I know it can sometimes be hard because when it effects your hip pocket, it gets a little personal. However, your chances of getting paid is much better if you remain professional.

2. When you do the work and they request an account, always get them to sign a work order which says that you have done the work and they are happy with the results.

This allows you to take down their information for your accounting package in a way that doesnt seem “un-trusting” and it serves as evidence that you did the work should you ever have to take it to court.

It is extremely important to have accurate records that shows you which clients owe you money, how much and for which invoices. A good accounting package can help you with this.
On your invoices, always mention your payment terms. Some businesses allow 30, 45 or 60 days for payment but my personal system is 15 days for homes and 45 days for business clients.

3. When calling your customer; like I said in number 1, always be polite and asked them why the invoice has not been paid. Get an explicit reason and write that down on their account information including the time and date of the call. Once again, this is handy if you ever have to take it to court. If they claim they never recieved the invoice (a common excuse), ask them why they have not requested it prior to this time.

Ascertain the exact date the invoice will be paid and if the clients answer is insufficient, ask to speak with the highest decision maker and complete this step again.

4. If no one answers your questions or sends a cheque. Try and speak to the highest level of the company, if their business is a chain, call corporate headquarters and go over all the answers their employees said recorded in step 3. Get a verbal agreement from them on when it will be paid.

5. If the above steps are unsuccessful, send them all of the information you have collected in step 3; including the original invoice and any followup letters via registered post. Give them a time limit to either respond to the letter or pay the invoice and let them know what what the options are should you get nothing by this date.

These options could be one of the following:

• Forward the account to a debt collection agency
• Adding Interest per day its not paid
• Taking it to court

Be Consistant, Be Tough

Some of you may think that you dont need to follow this whole process with some of your clients because many of them are your friends or they are wealthy. In the few times that I have been burnt, the client was wealthy so I thought I wouldnt have any problems collecting the money. Friends can also abuse your friendship to get out of paying.

Something you also need to remember is when people come into financial trouble they have to prioritize payments. If you arent firm you will be put on the backburner. They will pay bills they consider more important first such as electricity, gas and water. Then perhaps landlines, mobile phones and other monthly expenses. If you arent tough then you most likely be the last person to get paid. Remember the squeaky wheel gets oiled first.