Very few entrepreneurs begin their business ventures with the goal ofbecoming collection agents. Unfortunately, some of us have foundourselves in this unwelcome and unsavory role as a matter of businesssurvival. Developing a consistently successful accounts receivablesprogram does not have to be daunting. By following somestraightforward, time-tested guidelines, you can implement a "win-win"strategy that gets your invoices paid on time and allows you tomaintain positive, long-term business relationships with clients. Whatfollows is a discussion of how to walk the walk, and talk the talk, ofcollection.
Money Talks, and So Must You
Why do some business owners seldom, if ever, voice complaints aboutpast-due balances, while others spend significant time on thisproblem? Much of the answer begins long before an invoice is sent.Indeed, one of the most valuable changes you can make in youraccounts receivable process is to define payment expectations withyour clients in advance of services performed. You can also enter intoa formal agreement that includes a sum to be paid up front, and thenverbally review what you will do for the clients. Here's how:
In one case, we at SBT asked an international freight company with worldwide offices for adown payment of one-third. The freight company balked, but weinsisted. Even if we came down to 1% from our originalrequest, we would be able to say to other clients that we requiredthis internationally known corporation to pay a portion in advance.Remember, you can acquiesce if the client protests -- the freight companyunderstood our position. But if you allow no up-frontpayment, you will have a much harder time later with other clients, andyour cash flow is affected significantly.
Repeat after Me: "I Will Not Make Collection Calls"
Having personally defined the agenda for payment with your client,your next step in the accounts receivable plan involves separatingyourself from the collection process. Your business role now becomesfostering a long-term relationship with your client. This can be atall order if you are the person picking up the phone to demandpayment. Walking this walk involves two steps:
In your goal of preserving the valuable business relationship you havebuilt up with your client, while at the same time holding the clientto a contractual obligation, you are again establishing a boundary.This time, the boundary is more illusory than the written contractthat defined your terms. But it is a boundary nonetheless: You aretraining your clients to view your "accounting department," oraccounts receivable manager, as an autonomous arm of your business.You are also allowing yourself to concentrate all of your energy onbuilding your business.
Stay on Top of Your Invoicing Game
This brings us to your internal accounting procedures and how theyaffect your accounts receivable plan. The rule here is simple: keepyour side of the street clean. Here's how:
Solve Your Accounts Receivable Problems Today
Having involved yourself in setting the payment agenda, distanced yourself from the billing process, and put your internal systems in order, the final step is collecting from slow-paying or nonpaying clients. This involves an especially delicate walkand an artfully nuanced talk. Consider these steps:
There's no time like the present to implement a new approach togetting paid on time. The incentives are obvious, and the necessarystart-up time is minimal. The plan outlined above is remarkablysimple, but requires consistency and follow-through on your part.You will be amazed at how quickly you see positive results.
William H. Mills is president and chief operating officer of Software Business Technologies Inc., and its subsidiary, SBT Accounting Systems.
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