Your money in someone else’s back pocket.
That’s what your list of payments owed really is. And it’s one of the hardest areas in business to address, for a variety of reasons:
– You feel bad asking for the money
– You know what it feels like to be in their shoes
– You ARE in their shoes
– They always end up paying eventually
– Times are difficult
– …and the reasons go on and on.
In spite of all those reasons, or perhaps because of them, addressing credit control in your business – the control you have over those who pay you and when they pay – is a critical step to take. When taken to its furthest extent, it can mean the difference between your staying in business and having to look for a job. And yet you can avoid most payment difficulties if you plan ahead. (The hardest part of collecting debts is when you’ve presumed all along it’s going to get paid, in full, on time. When you realize it isn’t, your major corrective steps should have been taken long ago.)
Here are just a few things you should have in place right now in your business to prevent payment issues:
– A clear system for creating, sending, and following up invoices.
- It should connect with all your other contact information kept on your customers. Everything needs to be in one place.
– At least one person who holds primary responsibility for following up payments due.
– Credit check system. Run this before you take anyone on as a customer. Trust us – this is not something you want to do after the fact.
– Decide on your payment terms, and stick to them fiercely. One of the reasons people avoid payment is because so many companies let them get away with it. Unfortunately, “he who shouts loudest gets paid first”, but you’ve got to figure out your shouting procedure.
– Schedule automatic reminders. An integrated system that sends invoices, confirms their receipt, requests payment, and then sends payment reminders will save you hours of hassle – and will take care of the bulk of your debts.
– Follow up invoices before they are due. Everyone waits until well after the due date thinking maybe it just got paid late, was lost in the mail, got buried in the invoice pile. Beat the other suppliers to the punch and send a friendly reminder several days before the bill is due – then another one on the due date. By the time the bill is late (if it is), you don’t have to bother with the friendly reminders that no one pays attention to.
– Decide what happens to non-payers. Unless you’ve delivered all your services ahead of time without being paid (which is a very foolish way to do business), there’s something you can hold back, or stop. Can you shut down their website? Stop work on their house or garden? Apply a penalty fee? Charge interest? Negative incentives help immensely for getting paid.
There are many things you can do in your quotations and proposal process, as well, which will make this whole process simpler. We’ll be discussing credit control issues in our upcoming Business Builder webinar. You can’t afford to miss this event!