NASE Blogs

Making the Sale is Only Half the Battle

Sep 06, 2010

You work seventy hours a week. Spend thousands of dollars a year to market your business and attract customers. You demand employees give nothing less than pristine service and demand even more from yourself, often working past midnight to meet a promise made to a customer. The battle is half won. You met all your commitments and the customer is ecstatic about the great job you've done. So what's the final battle ... Getting paid ... in full and on time?


It doesn't matter what kind of business you have; graphic design, consulting, construction, plumbing, or a lawn service ... it's becoming more difficult to get paid on time.


When your customers slow paying starts to eat into your ability to pay your vendors and employees, what do you do? Cry the blues and hope for the best because you’re afraid to put too much pressure on a customer from fear they won’t use you anymore? Not in my book! When a customer buys products or services and doesn't pay I say get out the Louisville slugger and send your 350 pound cousin to collect. The sad part of collection problems is that all too often it's our own fault like not having a serious credit and collections policy. Go ahead ... look at your receivables. What are your payment terms? "Net due upon receipt" or "Net due thirty days". Well, if that are your “terms”, why are you sitting there with a bunch of invoices forty-five, sixty, or ninety days old? If this is what your receivables look like it's time to get serious about getting paid.


The most important issue you should be addressing is "How do I prevent problems in the first place?" It may seem pretty basic to some but the most common cause of payment problems are misunderstandings between a business and their customer as to exactly what work was going to be done, how much was going to be charged, and when the customer was supposed to pay. The majority of these situations can be prevented with a simple contract or letter of commitment outlining the specific work to be done, how much it will cost, what the payment terms are, and any additional charges that will be passed on to the customer for changes from the original work.


It would be nice to think we still lived in a time when we could do work on a handshake, but those days are gone and a written agreement is just good business sense. Use written agreements with customers and you will probably eliminate a majority of future conflicts. As a side benefit, if you have a customer who tries to get the better of you, you will have their signed commitment making it a lot easier for you to take collections action.


If you do have a payment problem act immediately by contacting the customer and find out why their payment is late or if there is a disagreement (misunderstanding), just what that disagreement is. Is there a quality question? Was work done they didn't think they were going to be charged for? Was the end result not what they expected? The basics here are to determine specifically what the complaint is. You might even offer to meet them over lunch ... on you of course ... to give the impression you want to amicably come to a resolution for the problem.


When trying to resolve a problem, first determine exactly what their questions are or why they think you didn't perform according to the original agreement and what they want you to do. Example; they weren't satisfied with the quality of work and want you to reduce the bill, or redo part of the project, or they might just want you to take a long walk off a short pier. Whatever their problem, you are fighting a losing battle until you know exactly where they are coming from, no matter how ridiculous it may sound. If the problem is simple, like a minor redo or knocking a few dollars off the bill, try to take care of everything immediately. If their demands are unreasonable explain that you will review the information and get back to them within a certain amount of time (such as two days) and then stick to it. This will give you the chance to evaluate your position and not be pressured to make a bad decision. The key in this conversation is not to get defensive but to get enough information to make a good business decision.


Once you understand the problem and how much money is in question determine how much of the problem is your responsibility. Be ready to bite the bullet if necessary and give the customer a little extra to get the problem over with. Once you make your decision contact the customer again and explain why you are making it. Also let the customer know you are willing to act immediately to resolve the problem.


The majority of all customer problems are caused by miscommunications and it is your responsibility to be the communicator. If the problem occurred because you didn't communicate (especially if it wasn't in writing) you have to take the majority of blame and probably chalk up a few dollars to education. When it comes to problem customers the best defense is a good offense and the best offense is a clearly written work agreement.


Now for those customers who are just a little slow in making payment here's a little outline for you to follow. Let's assume your payment terms are net due upon receipt, but living in the real world you give customers thirty days to pay before getting out that Louisville slugger.


The first step is to tell your customers clearly on every invoice what your payment terms are in big, bold letters "NET DUE UPON RECEIPT”. If you aren’t paid on YOUR terms then follow the steps below to put a little motivation on the customer.

  • If you're not paid in 15 days call the customer and find out when the bill will be paid.
  • If you're not paid in 30 days send a letter restating your payment terms and ask for a check to be sent immediately.
  • If you haven't received a check in 40 days call the customer on the phone.
  • If you're still waiting 45 days later send a register letter making final demand for payment notifying the customer that if payment is not received in 10 days you will start collections action.
  • If day 55 rolls around and still no money start collections action through the small claims court, a collection agency, or your attorney.

Does this sound a little tough? Why not just buy a roll of those "smiley faces" and "friendly reminders"? Or hey, just charge them interest? Sorry folks, not me ...I have bills to pay too. I give my customers quality products and services and meet all my commitments. If I don't produce, I am the first one to make-up for a missed deadline to make sure my customers get a good value for their dollar. I also make it clear what I expect as payment. If a customer is going to have trouble meeting the agreement they need to tell you right from the start. If they knew they might have some cash flow problems and didn’t tell you up front ... as far as I'm concerned they stole from you and I don't send no happy faces to people who get products and services through deception or out and out lying.


Are there exceptions to the rules? Sure there are. If a customer is really trying to take care of a bill by sending $50 a week, I'll work with them for as long as it takes to get paid. Which ones do I really watch out for? The ones who cry the blues saying there was a problem when I know there wasn't. Or the grand daddy statement of them all "If you don't keep doing work for me even though I'm 90 days behind I'll never do business with you again and I'll make sure none of my friends do either". Well hallelujah! Take your business someplace else and stick it to them. And while you’re at it, let me have all your friends’ names. If they run around with a person like you I want to make sure if they do business with me it's cash ... in advance.


So now what are you going to do with all those cute little smiley face stickers? Why not stick them on a note to your customers who pay like clockwork and let them know how much you appreciate their business!

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