Collecting Your Money article
Remember the washing machine analogy? Reducing costs is an important way to boost your profits. There are the obvious candidates of paying less for the things you buy but another cost is the money you are owed but have not yet been paid. It’s like acting as a bank to your customers, only you don’t get paid interest like the bank does. Nor do you get to charge them $35 for going overdrawn!
I am consistently confronted with evidence of people whose customers pay them less quickly than they’d like (it happens to me, too) and a lesson I’ve learned is that collecting your debts is something that you have to pay close attention to.
Your customers, with the best intentions, will not necessarily pay your invoices without a reminder and you need to have a system (that word again) so that your business consistently asks people to pay their bills.
Big companies do it – you can’t walk into a shop and take something without paying for it – not without signing your life away, anyway. Likewise, if you don’t pay your phone bill or electricity bill in good time, you’ll be talking to yourself in the dark before you can say “I’m sorry, I’ll get to it soon”.
Yet many small businesses shy away from asking for their money while they still have some power in the discussion (ie before the customer has got what he wants) or they fail to call up and demand payment when it is due.
I’m sorry everyone – you have to do it!
Have a look at your business. How do you collect on your invoices? Do you have a systematic way of going about it or do you send an invoice, after you’ve done the work, then hope they pay?
Can you change the way things work, so that you get paid before you hand over the goods (if you don’t sell goods, this can still apply)? Or can you set up a regular payment plan or take cash with order or credit card numbers, or, at the very least, get someone in your business to call up and ask for the money.
My brother is a Financial Director and has spent much of his career chasing people’s money. He tells me he favours the direct approach “You haven’t paid my invoice…why not? When can I expect it?”
Remember, you’ve done the work and there is an implied contract in place here – by asking you to do the work, the customer has agreed to pay you for it. This is money owed and you have every right to ask for it.
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See you later.