23
Mar

how NOT to get paid

zzzz - they WILL pay ... eventuallyThe most commonly applied “collection procedure” for many businesses is to wait for payment. Statements get sent out once a month and ... they wait some more.

Many go like this:-
1. They do the job.
2. Send the bill.
3. Wait for payment.
4. Send a monthly statement.
5. Wait for payment.
6. Wonder why the bill hasn't been paid.
7. Wait for payment.
8. Send the next monthly statement with a humorous collection sticker on it.
9. Get upset because the bill still hasn’t been paid.
10. Wait for payment.
11. Find out that they can't pay their own bills or that their overdraft has blown out.
12. Aggressively chase the account customer for payment.

It does not work.
Does this sound like you? If so, you are not on your own on this merry trail to a very stressful existence both for you and for your account customers.

DO NOT USE THAT POLICY.


A better way

Do something definite as soon as the payment is overdue. A polite reminder letter, an email, an sms message, a phone call, but something AS SOON AS THE PAYMENT IS OVERDUE. And then follow a simple collection procedure so that you, without being offensive, become hard to ignore.

Don't just send out statements.
Statements (sometimes called “The Lazy Man’s Way to Collect Accounts”) are a very valuable reconciliation document where many items have to be reconciled or many invoices issued in any one month. Product suppliers (like a hardware store, for example) can only have trading terms where the payment is due so many days after the end of the month. They serve a very useful function for this accounting exercise. But they serve no useful purpose as far as account collections go if many of your customers get only one invoice a month.

Statements can often slow down payments
Statements can encourage customers to pay you later, rather than sooner.
For example, do your statements look like this?

At the end of each month the balance bounces across from one column to the other. Interesting to watch - expensive to experience. If your account is still not paid the next month, the payment amount bounces over to the next column and so it continues! And, if one of your customers is "doing it tough" and decides to only pay creditors "90 days and over" (see just ask) your first statement (where the balance will be in the ‘Current Column’) has got NO chance of being paid - probably at least for another three months!

In other words, if you raise an invoice on 10th January for $3,000, it will appear in the ‘Current Column’ on your statement. It won’t appear in the ‘90 days and over’ column until the end of April. So, if you're only using statements as your “collection policy” you might get paid at the end of May (if you're lucky), some four and a half months after you raised the invoice. Er, that's as long as he
* is still in business and is account
* remembers what the bill was for and
* doesn’t decide to dispute anything and
* isn’t on holidays and
* feels like paying.

If you must use statements
Consider

1: adopting the following format when you next order stationery:-

2: get the person that supplied the service or product to the debtor to put a short hand-written note on the statement itself. Wording such as

John, Please settle this account.
Any problems, let me know.

Cheers, Steve.


Handy Hint
DON'T use coloured or funny stickers - they don't work. The debtor knows how long it took you to put the stickers on and they have virtually no "emotional impact" value - whereas the hand-written note does.

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