Slow Boat to Payment
Most companies assume that a slow payer or a bad credit risk is not worth selling products or services to, but that's not necessarily true," notes Les Kirschbaum, president/CEO of Mid-Continent Agencies, an accounts-receivable management firm based in Rolling Meadows, Ill. "If you can negotiate the right credit terms and interest charges up front, you can make a sale to a slow payer pay off." His suggestions:
- Develop a payment profile of customers before any sale, using your accounts-receivable records. If you can predict, based on past performance, that a company won't pay you before 90 days elapse, price the transaction at a high enough level to cover that payment delay.
- Require slow payers to agree to added interest charges. Just tacking a surcharge onto each month's bill won't help if your customers ignore it. But requiring them to sign a contractual agreement early on will improve your chances of collecting the full bill eventually, especially if a lawsuit proves necessary.
- Track slow-paying customers closely. Make certain your receivables records can tell you when to expect your payment. Then, urges Kirschbaum, if your records tell you 60 days and it's Day 61, your collection staffers need to get on the phone and start soliciting the payment. Remember, some slow payers eventually default on their debts and go out of business.