Home – New Forums Marketing mastery Collecting Money AND keeping the client

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  • #968684
    Rhys
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    I want to pose a dilemma that most of us who fly solo face from time to time.

    A client is slow paying an invoice so you phone them to chase payment. The person you need to talk to is out of the office / on a call / in a meeting / whatever, but you get a promise that they will get back to you. Of course you hear nothing so you call again and get some variation on the previous excuses. After a number of calls you do get through to the person in charge of the cheque book, they promise they will pay “by Friday”, but come Friday they don’t. And so on. And on.

    And critically you are trying to collect the debt without damaging the ongoing relationship with the client (because even though they are slow paying they are still a “good client” – you bill them a relatively large amount and they do always pay you eventually).

    Now this is not a post about debt collection – that’s easy (or at least it is easy to follow a process). What (in my view) is much harder is making a debt collection call to a client whilst simultaneously maintaining a sales / customer service relationship with the client (which is why this post is under the “sales & marketing” category rather than any other). And the client pays you enough that you do want to keep them.

    Within a larger organisation this is still an issue, but relatively more straightforward – you can be the “good cop” (making sales or providing customer service), someone else can be the “bad cop” (collecting a debt). You can even use this to your advantage – “I’d love to provide you X service, but those guys in accounts have put you on stop credit”: as the sales person you can align yourself with the client to maintain the relationship. But when you fly solo this just doesn’t work.

    So thoughts on this dilemma please, how do you collect that overdue debt and at the same time maintain the relationship with the client?

    Cheers, Rhys

    #1034605
    abacus
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    I will be watching this thread with interest because we are in EXACTLY the same situation.

    We have a real estate that is one of our major clients and they have one invoice outstanding at present that is becoming a problem. Now given that real estate Property Mangers have literally hundred of tradies to choose from to do “öur”work we certainly do NOT want to rock the boat.

    Sue

    #1034606
    Jay-T
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    We need to know what a good client is:

    A “good client” is someone who pays on time, with no argument and already knows the value you bring to the deal.

    I’m not sure how you can save a relationship like this since it seems to have major cracks in it. Even if they do pay there will most likely be some underlying tension which will inevitably kill the relationship.

    If it were me (honestly) I’d cut my loss and strip every bit of learning from it and place new conditions in place to reduce it from happening too often – business is all about problems and you need to be brave with how you manage some of them.

    Money can be made back (regenerated) but time burnt up chasing someone like this can’t be, sometimes we think that money is our most valuable asset when it’s not.

    We’ve all got 24 hours on the clock and it doesn’t stop to give you a break so we need to push in areas that will give us the biggest return so it’s up to you whether you think the return is worth it.

    Hope this helps

    #1034607
    Trish FCA
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    There are other questions that follow on as well. Will they be engaging your services in the future even though they know they have an outstanding debt with you? If they do, are they likely to be repeat offenders?

    You have explored all the normal avenues of debt collection. Have you tried paying them a visit personally to find out what the problem is? Most times the stalling is at a higher level than the person who pays the bill and they will happily tell you it “needs to be authorised”.

    If the debt is substantial it might be worth a collection house chasing the debt for you.

    I don’t envy your positions. Hope it turns out favourably for you both.

    Cheers,

    #1034608
    BB
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    There are a couple of things you need to remember –

    1. It does not matter how much work these people ask you to do, if they do not pay within the arranged time frame – they are not a “good client”.

    2. The time you spend chasing payment from this client could be better spent in looking for somebody who will appreciate your work enough to pay their account in a timely manner.

    3. This ‘client’ does not give two hoots about you or whether you eat this week.

    So – Get rid of the grief. Get rid of the client. Move on! And if the client really wants to use your services – make it quite clear that they need to pay a minimum of 75% upfront in future.

    And if you still need a ‘bad cop’ to refer to, then be like my clients and say – “Budget Bitch will harrass me forever if we don’t sort this out”

    cheers,

    B.B.

    #1034609
    Anonymous
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    Hi folks

    There’s a great article here that may be of interest, and the community comments that have been added to it might be useful too.

    http://www.flyingsolo.com.au/finance/financial-management/dealing-with-non-paying-clients

    Good luck!
    Jayne

    #1034610
    Rhys
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    I am really surprised by some of the responses to my post, particularly the level of certainty in those replies. I should add this is not – at this time – my problem, but rather that of a client (although I have had a similar situation in the past). I might leave my previous experience of this issue to one side (I might post on that later if anyone is interested), but address why I think this is an interesting question.

    Certainly I think from her reply that Sue from Abacus Screens recognises the problem, I wonder if anyone else does? If you do please post a reply, even though this is not my problem I am feeling a bit out on a limb here!

    I also think the situation is slightly different to the one outlined in Trish Weston’s excellent article on a related topic. At times I have also been down the path Trish describes, the path of not being paid but at some point deciding that walking away and getting on with other things is the best option.

    But on this occasion I am thinking of the situation where you potentially have recurring work with the client, so if you decide you want to pitch for that work how do you collect the outstanding debt without alienating the client.
    And yes sometimes – believe it or not – I do think you might choose not to walk away but to retain a slow paying client (as distinct from a non paying one). Why?

    Well put simply I do not believe that all – or even the majority – of small business owners are in the position of being able to work exclusively for “good” clients. Let’s broaden out that definition a little and ask what is a good client?

    Off the top of my head (and I am sure there will be things in here some of you disagree with, other things that you think important that I have missed) it would be one that is of adequate size, pays a price that allows me to generate a margin I am comfortable with, does not present too high a risk, provides interesting and enjoyable work (probably should have put that one first), ideally the client is one I am pleased or even proud to be associated with (or maybe this one should be first), I like them (yes, it really is a consideration) and yes they adhere to payment terms. Plus whatever else you want to throw into the definition.

    So I have lots of clients that tick all those boxes. But I have others who only tick some. Am I the only person on this forum in that situation? Apart from Sue of course – thanks for sharing Sue!

    What would the rest of you if you had a client that ticked all those boxes except one? Would you immediately sack them? What if they were a political advocacy for a cause you strongly disagreed with? Or mildly disagreed with? Or what if they were small in dollar value to you? Or they generate below average margin (someone has to)? Or their business was struggling (increased risk)? Or – back to the original question – they are sometimes slow paying? Or if they fall short on one of whatever other criteria you have nominated for judging “who is a good client”? Do you sack them?

    Do you really have the luxury of sacking all clients who are not to quote from Mary Poppins “practically perfect in every way”?

    And if you don’t take this approach how do you manage real dilemmas such as the one posed?

    Cheers, Rhys

    #1034611
    Burgo
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    Sue, be careful with property managers as I have been burnt on a number of occassions. In one such case to the tune of $ 10,000.00.
    Possibly an approach could be to face the customer and ask if there is a problem, were they satisfied with the work you did for them?
    Are they experiencing a cash flow problem and how can you help. Suggest a monthly repayment figure $ XXX, this suggests to them that you are genuinely intersed in still doing business with them.

    You will discover who is genuine and who is just trying to rip you off. The genuine customer will accept your offer the rip off merchant wont.

    Them are my thoughts.

    #1034612
    marketingweb
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    It’s a tricky topic slow payers. I haven’t had this in my business yet (touch wood), but in my day job we have the issue in both directions – us getting slow payers and us being slow payers.

    Generally what i’ve noticed in business is that everyone is pushing out paying as far as they can, much worse than a couple years ago. On the other hand, suppliers (at least in our industry) are much quicker to put clients on “stop credit”.

    We have always been pretty good payers overall, but in business sometimes it is hard to pay on time despite the best intentions. Particularly if THEY have some massive outstanding debt with one of their clients that they are waiting for. I know in my (day) job we have had cases where a particular client owes us around $200,000 which is a significant amount even in a small to medium sized business. We have to be bad payers for a little while – but then once we finally got this big payment in, it went straight out to our suppliers who had been waiting. Not the ideal situation but it does happen.

    Both creditor and debtor management is getting tougher and tougher all the time. That said though there are some people who are just selfish nasty people.

    Our policy (in my day job) is to try to pay the small local suppliers first wherever possible. In our case if a supplier pleads the “i’m only a small business so I can’t afford to carry debt, can you please help me out with this one payment that is overdue” will usually work.

    Matt

    #1034613
    Burgo
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    I believe there are a number of tains of thought on this particular topic. Ive already posted what I believe is an approach I have used successfully.

    However it is the soft approach.
    Many years ago I had a contract cleaning business with a friend, he left me to do all the hard work, getting contracts and chasing money.

    We had a contract worth over $ 60,000.00 a year but we waited three months for our money.

    I contacted the managing agent and told him that if we hadnt recieve our cheque by the end of the week we wouldnt clean untill we got paid. He decided to call my bluff, so we stopped cleaning for a week. Not only did we recieve our cheque but it was sent by courier. We started cleaning again, and for a while we were getting paid on time. Needless to say he went back to not paying so we walked off the job again. This time I decided it was time to cut, which we did. $ 60,000.00 is not some contract you would normally walk away from, and I was called MAD.

    Within two weeks not only had we picked up two contracts worth over $ 100,000.00 py but we were asked to return to the contract we had just walked away from, my terms were payment 7days. ( the managing agent had put in another contractor but the tennants who knew what had been going on told the managing agent he had a choice to get us back or loose the gig)

    Sometimes it may pay you to walk away from slow payers and concentrate on those that are willing to pay on time

    #1034614
    Becca
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    I would perhaps consider implementing an overdue fee, have a set date for payments to be made and if they are not that the client will be charged an overdue fee. If they were not avoiding your calls and staying in touch and keeping you updated, I would be a little more understanding but put the shoe on the other foot…

    how would they feel if you took forever to complete their work and when they needed to speak to you, they couldn’t reach you. Not very professional and not showing the level of respect that needs to be shown. I would consider setting out a contract and adding a fee for overdue payments. I understand it happens from time to time but you need to put a stop to it or they will continue to abuse your relationship.

    #1034615
    tildavirtual
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    I understand not wanting to lose the work but to me, a non paying client is not a ‘good client’. I have let go of clients in the past for not paying on time and I don’t apologise for it. I once fired a client because he saw me as an employee and not as an independent business owner even though it was a big contract for me at the time. The following day I signed up 3 new clients at a higher rate for the same amount of time.

    To me, a good client is someone who is great to work with, is respectful, pays ON TIME and I enjoy the project I’m working on.

    #1034616
    Cesar
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    Through my experience Rhys I have found that the best way to get customers to pay you on time is to become a member of either Veda Advantage or Dun & Bradstreet credit reporting agencies.

    I have found that with difficult paying customers you need to “put your foot down” to get results. You have to remember that you have not made a sale until you have been payed for that service or product. Numerous businesses come undone and fail when their cash-flow is suffocated by slow paying customers.

    By becoming a member of the either the two credit reporting agencies I mentioned above, you will get some positive results.

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