Getting Accounts Paid?

[TSH-SR]

Hi MBG,
I am a tradie so somewhat different industry approaches to payment.

Any client who you have had to chase before, becomes T&C 10% Deposit and balance on completion (that is, you hand your work over when they hand the cheque or EFT over) if they are unhappy with this arrangement, have the nice friendly deamour chat with them and tell them to look up someone else in the Yellow Pages. the reason they originally came back is they are COMFORTABLE with you and your work, let them sweat it out and find someone new.

I am a great beleiver in the fact that I would rather sit at home doing things I like for myself than slaving away for someone else who is going be difficult about paying.

You are also working with 3 of the worst sectors in business to deal with. I do big research before dealing with any builder or Real Estate agents and generally ask for 75% Deposit and balance on completion, I have been where you are and will not go back.

The other thing to ask them is if they can get 7, 14 or 30 day terms at Coles/Woolworths or the Pub - No cash no goods.

It can be a difficult task to approach, but it sounds as if you are close to suffering health wise and financially (if not already), look at it carefully and choose a couple that you are MORE comfortable to confront. Often people will take advantage because they can, when you tough up to them a little they give in.

Keep your chin up, let us know how you go.

Regards Tony

[timlea50]

Hi All,

It is a fine tune balance between sales and credit and will always be there. there are a number of ways you can also look at things - by setting up a "good cop" "bad cop" style of sales and credit management.

As the business owner (also probably the business' main sales person) you can be the "good guy" providing customer service, but consider hiring a temporary credit controller or contracting a credit management company/facility. Providing they are professional in their approach they can be the "bad guys" - chasing your money - and if the client complains about them being tough - you can be the good guy and say you will "have a word" - but they are only doing their job.....but you still appear to be the good guy.

Equally if your customer is slow paying and wants more work - if you didn't feel comfortable saying how about paying your first bill ....you can use your new found contracted-in skills to say your "credit department " is saying you shouldn't do any further work until you are paid.....more often than not most people will react sensibly and probably will be slightly embarrassed saying they didn't realise the bills were "that old" ....

One other thing to consider also would be to use a factoring company that :

1) can provide credit control facilities (ie chasing debts)
2) can credit insure your customers at the sale time (against your credit approved customers going bust)
3) can provide cash upfront against the invoices raised (usually paying around 80% upfront within 24 hours) returning the remaining 20% when the customer pays.

They will usually charge you a fee for doing so - somewhere between 0.5% - 2.5% (dependent upon your turnover) and a cost of funds for the funds you decide to borrow (usually around 9%- 12.5% per annum.

You might be interested to know we have created an introductory white paper on factoring Factoring 101 - the basics you need to know which is available free of charge from our web-site at the address above.

As for charging interest - in my experience companies will NOT pay it even if you put it in your terms and conditions.....and it always begs the question if you charge it are you going to enforce the collection of it......

Good luck to all.

Regards

Tim Lea
cashstream.com.au

[arswa]

If asking customers to pay is not your - or your staff's - favourite job, stop doing it.

Businesses selling to other buisinesses have to give credit because their rivals do - but it means giving your customers interest free finance. Giving credit is so risky most banks only value debtors at 30% to 50% of book value, and they can be reluctant to place any value on them at all, which is hardly surprising when there is a 2% bad debt risk the moment you give credit and a 25% risk at 90 days.

But if you have to give credit, your options are:

a) make a few phone calls/send a few letters and hope they will pay;
b) make credit control a priority;
c) factor your debtors;
d) outsource your debtor management.

Just making a few phone calls means being your customers' interest free financier and that creates a bad debt risk (what would happen if a big customer went bust owing you three or more months' sales?).

Making credit control a priority is easy for larger firms, but harder for small ones without a trained credit controller. Getting staff to do it amongst other tasks can be hard and stressful unless they have been on a credit control course. Doing it yourself is unproductive and stops you growing your business, but if you are a small firm you might have to.

If you want a quick payment, factoring is an option. Factoring companies pay up to 90% of your invoices within days and the balance (minus 2 to 4% commission) when your customer pays them. But they often insist on factoring all your invoices, so you pay 2 to 4% on every credit sale you make. The risk is if your customer fails to pay the factor you have to refund the amount advanced. To ensure they get it they require personal guarantees and/or other securities plus the authority to take the money directly from your account. If you do not have it, the guarantees will be exercised and if your personal assets are at stake, you have a serious problem. Definitely speak to your accountant or lawyer before factoring.

If you don't have the staff or time, look at outsourcing your debtor management. This can free you from credit control, invoicing and other debtor chores without customers being aware of it. It can improve your cashflow, lower your costs, reduce bad debt risk and save you from being a source of interest free finance.

Whatever you choose, do something because unless you manage your debtors they can send you out of business. If that is easier said than done then please feel free to contact me as below to discuss the outsourcing option further.

Adrian

[rendersmart.com.au]

Hi,

I also run a 3D architectual visualisation business, better known to people as artists impressions. And like you we run into the same problems. Whilst deposits etc are a great idea, they are difficult in our industry to some extent. My advice is watermark all images until payment is made. That works quite well. Even though it takes some time todo this and I know its easy to flick off image after image, but spending those extra few mins may save you more time and stress. If you get the feeling a client is going to be a pain, reality is you don't want their business, so hit them with the 50% deposit. The goal is to filter out the clients who don't pay. If you feel you are scaring them away, then possibly you are attracting the wrong clientel. This won't happen overnight.

Good luck, feel free to contact me for any industry chit chat.

Regards,

[Sheila]

Prior to about 3 months ago I have had no personal experience with bad payers. (I'll talk about that in a moment) but...as a customer I know I appreciate companies that offer a substantial discount fro prompt payment. It makes it worth my while to do this.There will always be times when money is tight and those businesses which give me a discount allow me to pay a little bit later on those bills that don't (I never intentionally let a bill go overdue).

Regarding my own experience, we are marriage celebrants and have the ability to say that if no payment is received before a wedding, we will not perform the ceremony (never happened!) Where we have found it hard is when we have done work for a couple before we receive the non-refundable deposit we charge and then for some reason the wedding does not go ahead.

We don't have a tangible product that we can say we supplied, it is our time, either researching information or time spent with the couple going through their requirements for the ceremony. Our first visit is free whilst they are still working out whether to choose us, but once they indicate that they have chosen us I feel we should have the right to charge for our time there on in.

Prior to this was never a problem, but we have had 4 couples in a row that have changed their mind and ended up going with someone else after we have given/sent them samples of readings and vows etc and spent considerable time doing official paperwork.

In our business we need to develop a rapport with the couple and it makes it seem very personal when in effect we are dumped. We are now in a position whereby we are having to make couples pay up front before we offer any information at all.

I hate that these couples have rocked my perception of the goodness of people. We have not pursued the debt collector route as we feel it may be counterproductive. I would be interested in others' thoughts on this?

cheers Sheila
www.idoby2celebrants.com.au