In my work as a business accounting consultant, I have discovered that the root of my clients’ financial problems is an underestimation of their value in the marketplace. This low self-regard often stems from a desire to be liked by their customers, including the customers who owe them money. For their businesses to survive, however, my clients learn how to draw firm boundaries between themselves and their customers, particularly with slow paying customers, so they can succeed. If they continue to let customers take advantage of them, they are plagued with cash flow problems. Some eventually go out of business. I believe this can be resolved by looking at business finance in a new way.
One of the easiest ways for my clients to improve their businesses is to take greater responsibility for their actions. While this is an easy business step, it is often a very difficult personal task. It is human nature to become complacent rather than to change how we do things, even when the change is for our own good. Many of my clients let far too much time pass before they take action when a client has not paid an invoice. Others sometime charge below their standard hourly rate just to get a job and make quick money.
It’s not easy to change our ways and take greater responsibility in situations like these. It takes courage to acknowledge that Larry’s Corner Grocery Store is so far behind in payments that conducting business with them is no longer an option. To change behavior my clients stop ignoring deadbeat clients. Many clients feel they are acting harshly by cutting off credit rather than perceiving this decision as conducting sound business practices.
Understanding the rationale for accepting lax business practices will help us get past them. Asking questions about motivation and understanding are important steps. This is an act of self-respect. That act alone takes courage.
Most of us do not know how to truly respect ourselves. Like marketing and pricing, collecting is a skill that takes time to develop. Like my clients, once you accept responsibility for your late paying clients you can collect the money that is owed to you by using the following seven steps.
- Call the client on the phone to gain a true understanding why payment has not been made on a particular invoice.
- Always be sure to get the first and last name of the individual who handles the accounts payable department.
- When calling, if a recording comes on or the person is unavailable, be sure to leave a brief message about the reason for the call. Refer to the particular invoice and ask why the invoice has not been paid and when it will be paid.
- Immediately after calling, fax a letter to summarize the message. Include a copy of the invoice in question with the letter.
- Make a note on the calendar and be sure to call within two business days if the call hasn’t been returned.
- If no contact has been made leave another message and be sure to follow up in another two days.
- When contact is made listen to their side of the story to resolve the matter.
The key is to follow up. By calling on a regular basis the client knows that this is an important issue. The client also knows they are going to have to face the problem. Receiving frequent calls places the matter at the top of the list of that the client must attend to.
Following through with these actions will boost self worth. So don’t be afraid to take responsibility and see how business will change for the better.