Written by Scott Edmonds
This may sound provocative but until your customer has paid you, your delivered product or service is a gift. From you to them!
This may sound provocative but until your customer has paid you, your delivered product or service is a gift. From you to them!
We often hear business people saying that they can´t push for payment on mounting and ageing accounts, because "the customer is a long standing, good customer". Let´s get one thing straight. Good customers pay their bills. Someone with long outstanding invoices is not a good customer. They are using you as their gift shop!
Of course, extenuating circumstances happen, and we´re not talking about those cases here. We´re talking about whether you´re suffering cash flow stress because of loose, ad hoc collection policies.
Right from the very start, lay firm ground rules down as to what your payment terms are. Introduce your payment terms in your conditions of engagement. Your sales people should have a script that goes: "We are excited about providing you with the highest standards in service and products. To enable us to do that, we do expect to be paid for what we do, on time. The alternative is to cut corners, and we simply won´t do that to our clients. We trust you´ll understand."
Another great way to do this is in an: "Our commitment to you, and your commitment to us" agreement, which you and the client sign. Once you´ve lain the terms down, courteously but firmly follow through. Follow up by phone within a day of the payment being overdue. Hard tactics? Not at all. A genuine customer will appreciate that they agreed to the terms, that you have a system, and that you´re following it.
Don´t educate your debtors not to pay on time through your invoices! It never ceases to amaze me that organisations still send out invoices and statements with 30/60/90 days PRINTED on them. This gives the customer permission to hold off until 90 days before even thinking about paying.
The best way is to state an actual date when payment is to be made on the invoice. This conveys to the customer exactly what your expectations are and it gives you a specific date to follow up on after 24 hours.
A bank direct debiting system or payment by corporate credit card is an excellent way to get paid on time, without confrontation.
Ask for part payment up front. Typically many businesses ask for 50% payment up front to begin a project, and the balance on delivery of final approved copy. If you´re good at what you do, and you deliver a whole host of services that your client truly values, you have every right to set terms like this.
While some of these measures seem fairly tough or anticustomer orientated, it´s just business. You have delivered a service or product to your customer in good faith, based on your pre-agreed payment terms, and they have not paid for it.
They have treated you as a bank, and your product or service as a gift. Good customers are those who pay you for what you do.
