Show Me The Money

SHOW ME THE MONEY
By Laura Tigges

Ginny Blair is fed up with customers who don't pay their bills on time. Sometimes she waits up to 120 days for payments which creates financial dilemmas for her newspaper-publishing business.

"The cash-flow problem has made for some tense days and sleepless nights, along with maxed-out credit cards, to stay afloat," says Ginny, a member of Rainbow Rays Chapter in Bakersfield, Calif. "All this has, in turn, put a strain on my personal finances."

Ginny is not alone. Thirty-two ABWA members who are business owners recently responded to an email questionnaire about consumer debt. Of those, 25 percent said they have a problem with customers not paying their bills.

"Quite literally this affects my business because I end up working for free if my client does not pay," says attorney Mari Vonne Essex, a member of Greenspoint Chapter in Houston. "It's no different than someone working for a corporation being told on payday, 'Sorry, not enough money to pay you to day; I chose to pay my vendor instead.'"

Linda Byars Swindling of Downtown Dallas Chapter in Dallas is a mediator, attorney, consultant and professional speaker who addresses employer issues. She offers business owners the following tips to avoid collection problems:

  1. Make sure bills go out in a timely manner. Consider more frequently billing. "It's important that you bill your clients while your services are fresh in their minds," Linda says. "The best chance you have at collecting your full fee is when the client feels the need or right after the need has been satisfied. If you wait too long to ask for payment, the client has another pressing need."
  2. Change wording on bills from "due upon receipt" to a specific number of days.
  3. Make sure finance charges and interest fees are in writing.
  4. Start contacting customers as soon as they miss a payment and stay in touch with them until they pay--but be friendly. "You need to remember you're providing a service, and as a business person, you don't want to stir up trouble," Linda says. "If you're friendly, they won't want to avoid you and you'll be the one they want to pay."
  5. Have the right person make calls for payment; someone comfortable with asking for money. Ask appropriate questions such as, "How much can you bring by today?", "When can you have the rest of the amount?" or "What type of payments can you afford to make?" If the customer says the check is in the mail or the check is being written at this moment, then offer to pick it up at a specified time or ask that a copy be faxed to you for your files.
  6. Don't wait longer than 120 days to use a collection agency or an attorney.
  7. Have a plan of action, letters drafted and standardized procedures to follow. For example, Lisa Dezzutti, president of Market Connections Inc. and a national member who lives in Clifton, Va., says she requires a 50 percent deposit before she begins a project. She bills the remainder when the customer accepts the project. She keeps tabs on overdue invoices and always calls to follow up, at last once a week until the bill is paid. "Most bills are paid within 45 days," Lisa says. "In order to manage cash flow, we have to be on top of invoicing and collect in a very timely manner."
  8. Watch for decreased contact, warehouses being emptied and your client's loss of a major client. These signs indicate that your client may be having financial problems.
  9. Don't offer more goods or services when a past bill hasn't been paid. "Be cautious if they promise you things." Linda warns, "You want them to put their money where their mouth is. They can burn you once, but it's your fault if you let them continue to burn you."
  10. Ask for a retainer or deposit. Terry Lawler Early, owner of Big as TEXAS, a seminar planning company, and a member of Spindletop Chapter in Beaumont, Texas, is one of many business owners who doesn't deliver goods or services unless the customer pays for them in advance. "It's possible I've lost some business because of it. I know at least one dissatisfied customer," Terry says, "But if I don't know them, I can't afford to trust they're telling me the truth."
  11. Watch for big companies who are slow at paying small businesses just because they think they can get away with it.
Peggy Power, owner of Power Business Services and a member of Paulding Charter Chapter in Dallas, Ga., says she has a difficult time reminding friends who are customers to pay up. But Linda says friends shouldn't be treated any differently from other customers.

"Sometimes your friends think they can let your bill slide until their other bills get paid because other business owners will get nasty," Linda says. "But you should put your friends through the same procedures as your regular clients and remind them that this is not your friend relationship, but a business relationship. If you have a difficult time dealing with them, have one of your employees work with them."

Consumer debt not only affects your company's cash flow; it can distract you from your daily work routine. By following these tips, you may be able to run your business more efficiently and avoid future collection problems.

Reprinted with Permission from Women In Business, January/February 1998 - p. 30,31 - It's Your Business


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