QuickBizBreak by david weaver

Take a quick break from your biz to ponder new ideas and strategies that will turbocharge your business.

Posts Tagged ‘debt’

Dealing With Collections Excuses

Posted by QuickBizBreak on July 28, 2009

296223_empty_pocket_1My wife and I replaced the foundation plantings at the front of our house this past April. Some sort of plant disease in the Atlanta area we couldn’t identify was slowing eating away at the shrubs and it seemed easier to replace them all rather than find similar-sized plantings. We paid 50% down with the balance due upon delivery. When the delivery was made, however, the driver indicated the local nursery in Roswell would send us a bill since he didn’t know the final amount due. Fast forward to July when after repeated promises from the nursery that someone would call with the correct billing amount, we simply stopped calling. This week, someone finally found the outstanding balance, called us, and we paid.

While this example is most likely an oddity in these times of reduced sales for most businesses, it got me thinking about billing and collections practices of small businesses. An important rule of on-time collections is to have on-time billing. Otherwise, we may be setting the stage for late payments from our customers by our own actions. Showing clear payment terms at the point of sale is perhaps the number one rule. If customers aren’t sure of your terms, don’t expect timely payment.

I ran across a great article in Entrepreneur magazine with more insight into collections. Steve Wideman with Credit Control LLC recommends alternate payment methods, such as a credit card, if a customer is asking for terms. “If they’ve got an order for $500 or $1,000 and the owner won’t put it on his credit card, you’ve got a problem. You know he doesn’t have the confidence that he’s going to have the money to pay for things.” Lawyer Steve Harms, co-author of Credit & Collections Kit for Dummies, suggests setting up an installment payment plan with the first payment due today. Insisting on “today” is key, he says, because it’s a test of whether the client is lying.

If a customer is facing personal problems that are preventing them from paying, perhaps a family illness, Harms advises that he still needs to get him “to prioritize my bill even though he’s got personal problems. He advises structuring a request for payment in a way that shows concern for the client while cautioning him against causing further problems by creating credit and business problems.

“The check is in the mail” is a common response from late-paying customers. There are only so many times you can hear this and that number is two. After hearing it the second time, Harms is concerned the customer is lying. “Tell the client you’re sending an overnight delivery service to his office that afternoon to pick up the payment…and insist on a cashier’s check.” If a customer isn’t paying you, they cease to be a good customer.

What to do when a customer doesn’t take your calls or respond to voice mails and e-mails? The article suggests confirming if the business still exists, checking the company’s website for any relevant news, ask other suppliers if they are experiencing the same kind of collections problems. Check your files for other contact information such as home phone and address, personal e-mail addresses or even Facebook or Twitter contact information. Send a certified letter demanding payment. The last step is a collection agency or even small claims court.

Alan Hauff, director of the University of Missouri-St. Louis Small Business & Technology Development Center, recommends flipping the conversation. “Bring it back to: ‘We need this business relationship. I need it, we need it.’ “ Don’t be afraid that needing your money now is a show of financial weakness. It’s not. It’s a sign of sound financial management.

David Weaver



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