PROTALK CORNER:
There’s More to Making Money Than Making the Sale

While bad debts are going to happen and are a cost of doing business, it’s important to make sure you take the right steps to minimize those occasions.

If you want to beat the problem before it beats you, here are a few tips that might help. Remember the cardinal rule: “The longer you allow an account to go uncollected, the less chance you'll ever see the money.”

First and foremost, don't think you have to give everyone credit. If your customers want credit, have them fill out a credit application and then check their credit.

Be sure to communicate either by a contract or a notice of payment terms exactly what your payment terms are. Many payment problems are caused by misunderstandings.

When a customer is invoiced for the first time, call after a few days and ask them if they have any questions and reiterate payment terms. Then, look at your receivables every day and act! Don't be shy about reminding a customer they have some of your money.

Have a policy for handling delinquent accounts and stick to it:

• If you’re not paid within 15 days, call the customer and find out when the bill will be paid

• 30 days: send a letter restating the payment terms and ask for immediate payment

• 35 days: call the customer and strongly, but professionally, demand to know why they haven't paid and when you will receive payment

• 45 days: mail a registered letter notifying them that if payment is not received within 10 days, you will start collections action

• If day 55 rolls around and still no money, start the collections process

You need to be strong and consistent about letting clients know that you are serious about collecting the money they owe you.

Are there exceptions? Sure there are. If a customer is trying to take care of their bill by sending partial payments, work with them. If a customer has a legitimate dispute about the work performed or product you sold them, take a hard look at what is needed to appease the customer. If you have a large client who always pays but their standard is 45 or 60 days, go with the flow.

What types of customers should you watch out for? The ones who cry the blues, trying to say there was a problem with your product or service when you know there wasn't. And be wary of the infamous threat: "If you don't keep working for me or selling me products -- even though I'm behind on payments -- I'll never do business with you again." For these people I am happy to let them take their business someplace else.

As for your customers who pay like clockwork—send them a big thank you to let them know how much you appreciate their business.

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