Discontinuing work on projects when payments are not made on time.
James Stroop, president and CEO of $12-million Lakewood Inc., a construction company in Holland, Mich., takes a hard line when it comes to getting paid. He stops work on any job for which payments are 20 days overdue.
"We bill for projects monthly, sending out invoices on the 25th of the month," Stroop explains. "Payment is due on the 5th or 10th day of the following month. By the 12th day, I get a list of customers whose payment hasn't been received." On days 15 through 18, Stroop and his account managers hit the phones, warning delinquent payers that projects will be shut down if payment isn't received promptly. "Usually we don't have to take further action," he notes. But if customers don't pay up, construction grinds to a halt on day 25, only to be resumed after a cashier's check is deposited in Lakewood's coffers.
Lakewood has written off less than $5,000 worth of bad debt in the company's 15-year history. "If you're dealing with regular customers, they won't want to see their shipments or services interrupted," reasons Stroop. "Companies have lots of leverage -- all they have to do is be willing to use it."