Don't Get Stiffed - 4 Simple Steps to Help Get Paid
As a business person collecting past due accounts was not what I put on my list as a "pro" for going to work for myself. I assume you didn't have it on your list either. However, collecting from clients has become a hardship for many contractors over the past year. We all know the tough toll the economy is taking on our business. We don't need to be adding the weight of reduced cash flow because of slow or non paying clients.
Let's face it, it's hard enough to get a job today let alone not knowing if you will get paid. Even if you have a contract that covers performance payments, you can still get stretched out. Most contractors say they will just shut the job down if they don't meet a payment. That's harder on your cash flow than it seems. Yes, you don't want to keep doing work if there is the likely hood of not getting paid, but what about the money already lost in the job. You have already made payroll, bought supplies, and continue to pay your fixed or hard costs. If they're behind on their payments by all means shut things down, but be ready for the fun to begin.
The secret behind all this is being proactive. Making sure your clients don't move into the 30, 60 or even 90 day range is more important now than any other time in the history of your company.
Fortunately I found an article by Entrepreneur.com that gives you 4 simple steps to make sure you get paid.
Let's face it, it's hard enough to get a job today let alone not knowing if you will get paid. Even if you have a contract that covers performance payments, you can still get stretched out. Most contractors say they will just shut the job down if they don't meet a payment. That's harder on your cash flow than it seems. Yes, you don't want to keep doing work if there is the likely hood of not getting paid, but what about the money already lost in the job. You have already made payroll, bought supplies, and continue to pay your fixed or hard costs. If they're behind on their payments by all means shut things down, but be ready for the fun to begin.
The secret behind all this is being proactive. Making sure your clients don't move into the 30, 60 or even 90 day range is more important now than any other time in the history of your company.
Fortunately I found an article by Entrepreneur.com that gives you 4 simple steps to make sure you get paid.
- Be Proactive. Entrepreneurs don't go through the difficult work of planning and launching new companies to become bookkeepers or bankers. However, proper invoicing and collections are just as important to the success of. . . Read more
- Watch For Signs. When a customer offers partial payments or is not answering calls, it's a warning sign, says William Dantin IV, president of the Corporate Investigations Bureau, a national collections agency. Dunn concurs."Businesses should be watching their. . . Read more
- Do-It-Yourself Recovery. If an account is past due, business owners may be able to collect by paying a personal visit. Dunn says, "Go see them at work, at the coffee shop, anywhere you know they will be." She believes the next most effective way to get paid is. . . Read more
- Seek Professional Help.When delinquent payments are piling up and you spend more time trying to recover the funds than run the company, Dantin says it's time to call in a hired gun, preferably one with . . . Read more
All very sound advice! As a collections professional there are a few tips that I feel should be added. The first is based upon U.S. Department of Commerce data that shows accounts have the highest probability of being collected by your company during the first 90 days. After that, internal recovery rates drop like a rock and you should bring in a professional.
Their are two reasons why you would want to wait longer than 90 days: 1) You don't want to give up 30, 40 or even 50% to get you accounts collected. 2) You are probably aren't ready to "fire" a customer who is only 90 days past due.
AmerAssist offers an alternative solution. For a fixed fee that is often $30 per account for Landscape Contractors we follow a proven and professional 120 day routine of contact using Written Payment Demands, Phone Calls, Credit Reporting that at the end of the process uses a formal attorney demand (worth what, $200?).
If that process doesn't work, we will put the $30 towards working another account (we call it our 100% collections guarantee) and you can either have us stop working the account, or we will move it into our second phase which is designed to pursue "salvage accounts" up to litigation. All on a NO COLLECTION - NO CHARGE basis.
Our process is designed to dramatically reduce the highest cost portion of your receivables ... the money you wouldn't have collected otherwise!
I'd be glad to explain our unique process either over the phone or via a webinar.
Years ago I started collecting deposits on medium sized work orders, even repairs. Then I set up progress payments at key times during the job. Timing the progress payments to coincide with your investment into the job can really minimize your risk. When the job is complete the customer will owe me no more then 20% of the total work order. If the job is large I may leave only 10% for the final payment.
If I have a problem collecting the deposit, it's a red flag and I usually walk. If I have a problem collecting a progress payment, I can shut the job down. Of course there can be judgment calls to the system, but generally speaking, it's much easier to deal with a money problem early before I've invested a lot of money and labor into a job.
I was apprehensive when I first started doing this, but I had such a huge accounts receivable, I actually needed the operating cash flow. I did lose some customers over it, but not the good customers. I lost the problem customers that helped to put me into the cash crunch in the first place. The good customers respected the system and the value of my service.
One interesting result was my scheduling became suddenly much easier. I hadn't realized how much of a challenge the problem customers were to service.
Then when you do turm your problem A/R invoices over to someone like Steve above, the figures are easier to handle you know you've done your part.
Just a suggestion.
Thanks for sharing this
what do you mean by the statement Seek Professional Help, please can some one reply me.
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An excellent presentation. Clear. Practical. Insightful. Shows a depth of experience. Thank you. I learned a great deal.
what do you mean by the statement Seek Professional Help, please can some one reply me.
If you feel that a particular client or clients are proving to be difficult, I think it is best to seek professional help, as they know how to best deal with these situations.
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