How to Make Sure you Get Paid for What You Do.
Here is your wake-up call. You may be very good at what you do. No matter how good your product or services, you will not stay in business if you are not paid.
What does it take? The basic elements of assuring payment include delivering value, developing and implementing a solid credit policy, consistent billing and setting expectations for payment, a well trained staff and active accounts receivable management.
Customers expect value. They choose to do business with you. It follows then, that in order to deliver what your customer values, you will have to understand the value decision made by your customers.
Communicating with your customers will help you discover the value they see in their decision to do business with you. It also helps to understand your industry. The product or service you provide was developed to fill a need or solve a problem.
Now that you know what brings your customers to you, deliver. Give them the value they expecting. On the other hand, a customer withholding payment may not have received what they valued – the very thing that drove them to you. Find out and fix the problem. A happy customer is most likely a paying customer.
Develop and Implement a Solid Credit Policy
A risk assessment for your business sets the stage for future choices and decisions. Consider the impact on your business if customers do not pay as agreed. What will you give up if the cash does not come in as promised?
- Evaluate your cash flow needs – what do you require both short and long term to meet your obligations - never forget that cash is king.
- Acknowledge the natural tension between sales and credit terms. More liberal credit terms can increase sales. More conservative credit terms can decrease sales.
- Know your competition – you may be impacted by what is being offered by your competition.
Set your terms - somewhere from conservative (with restrictive terms and investigation) to liberal (with open terms and more resources in recovery).
Set goals - objective and measurable. You may want to track several. If your policy is not performing as hoped, find out why and adjust. Recognize issues early and respond.
Consistent Billing and Setting Payment Expectations.
How do your customers know what to pay and when? Provide a clear written invoice or billing statement with an unambiguous payment date. Do this timely and regularly to set an expectation with your customers for timely payment. A customer with clear expectations backed up with consistent billing practices is a happy customer – and more likely to pay. Even more impactful is a clear written customer agreement and the disclosure of consequences of not paying as agreed. No surprises.
Train your Staff.
The best credit policy is only as good as the staff who implement the policy. Make clear assignment of roles and responsibilities.
Your staff should be familiar with the credit application or have seen one of your invoices. Forms are useless unless they are completed correctly. Does your staff confirm information is complete and can identify who will be financially responsible? If something is missing, are our employees requesting it before the customer leaves?
Your staff should be comfortable updating customer information. The information requested and gathered at the time of service is what your business will depend on for future contact and recovery of monies owed. Is your staff comfortable asking for payment? It can be an art to ask for payment in a customer service oriented way without confrontation. Take the time to train your staff.
Accounts Receivable Management
Accounts receivable are promises to pay at a future time. Don't allow them to slide into "un-collectible" status.
The largest companies have professional A/R managers, but outside of that elite group, very few businesses have that resource. What do they know that they are willing to make this investment? They know that there is cash in A/R. They know that when A/R is managed well, “at risk” accounts are identified early, and ineffective credit policies adjusted timely.
Consider the amount of resources expended on chasing after money you have already earned.
You are good at what you do - and we know A/R. If you need assistance with your A/R, contact us. On Behalf is not a collection agency. We will manage your front end A/R all the way through late stage efforts. Ask us how we can help.