What is the difference between a business owner and a staff member? The answer is quite profound…Month End! Staff members enthusiastically look forward to month end to collect their pay cheque. From the 24th of the month to the end of the month business owners are often the opposite. They are stressed out trying to get enough money in to pay the end of the month payment demands, including the staff wages.
Maximising your collections efforts is vital for your continual survival and success as a business. Following are some of the simplest most effective tips I have learned from over 40 years of business ownership, collecting as a collector in my younger years in the consumer finance business and over the years designing and implementing collections programs in banks and credit departments of companies both locally and internationally.
Many times I have witnessed both myself and other business owners, executives and salespeople land a big order and then celebrate the occasion with close associates by throwing a party or have an evening out to pat ourselves on the back, only to experience non-payment of the account six months later. A SALE IS NOT A SALE UNTIL THE MONEY IS COLLECTED. Following are several points to consider when collecting:
- State Your Terms Upfront: The first thing I would suggest after closing the sale or contract is to take a few minutes and carefully cover what the payment terms are. Once someone commits to specific terms, they are very apprehensive about breaking the commitment or denying what they agreed to. Many salespeople and even business owners are afraid to stop at the time of closing and make the terms clear. There is a fear the client may get upset and not move forward.
Try this: “Mr Client, many business relationships start off great but fall apart because the terms of payment are not clear to both parties. May I take a moment to clarify the terms so that our relationship stays positive and intact?”
- Utilise Credit Information: Fill out a credit application on new accounts and ones showing big changes in buying habits and be sure to check them out yourself or have your accounts check it out. Remember, there is a reason why banks do credit checks on borrowers. If you are giving credit in essence you are a bank.
- Service Your Customers Regularly: It is common for accounts to go into the 60 and 90 day column if the salesperson has not seen them for 60 or 90 days. Every time you or one of your people show their face, the clients think about how much they owe you. If you are there, it’s easy to mention the outstanding account. Stay in front of clients (especially slow payers) more often and you will see an improvement in cash flow and sales.
- Don’t Lose Their Business: If someone owes you money, they often take their cash elsewhere. The reason for this is that they are embarrassed that they owe you money and cannot pay. They still need supplies so they go elsewhere to buy. Explain to them that you do not want to lose the cash business and recommend they set up a reasonable payment plan on the old bill, and pay cash for their present orders. This way you still get the business, which you want and you are reducing the old bill.
- The Squeaky Wheel Gets The Grease: When someone promises to pay at 12 noon on Friday be sure you have a system of follow-up so that at 1:00pm you are calling that person if the money isn’t in. The reminder system can be electronic, done with a diary or using a pending or card file. If they don’t have the full amount, take the portion they have.
Client: “I didn’t pay the 5000 because I don’t have it”
Business Owner: “How much of the 5000 do you have?”
Client: “2500”
Business Owner: “Great, I’d be happy with the 2500 today and when do you think you can pay the other 2500?”
Note: What often happens if you don’t follow-up immediately they pay nothing to you because they didn’t have 5000. Then they pay the 2500 to someone they owe 2500 to.
- Partial Payments On Promises: When someone says they will pay you 6000 on the 30th and it is now the 8th, attempt to collect a minimum of 10%-20% of that amount immediately and accept the balance at the end of the month.
Client: “I can pay you 6000 on the 30th”
Business Owner: “I can accept a delay although I need 1200 today and then on the 30th you can pay me the 4800. Can you do that for me?”
Client: “Okay”
Note: Research shows that if you get a partial payment on the promise, the month end promise is kept more often.
- Be Specific: When someone promises to pay, for example on Friday then get that person to commit to a specific time, how they will pay, where they will pay and the amount agreed upon. Then get them to repeat it for clarity purposes and/or just before you hang up, re-state your understanding.
Client: “I can pay you 2000 on Friday”
Business Owner: “What time on Friday and where and how will you pay?”
Client: “I will go to XYZ Bank in Cashville and deposit 2000 in cash into your account at 12 noon.”
Business Owner: “That’s great, Mrs Client, just before I hang up let me make sure I understand you correctly. On Friday at 12 noon, you will go to the XYZ Bank Branch in Cashville and you will deposit 2000 in cash into our account. Is that correct?”
Client: “Yes”
Business Owner: “Would you also fax or e-mail me a copy of your deposit slip.”
Client: “Okay”
- Problem Solve: Be empathetic and try to assist the debtors by reviewing their situation and problem solve with them. One method the debtor could use is to contact all creditors and convince them that no one phone the debtor from the 1st to the 25th so the debtor can spend his or her time generating sales (more money to pay creditors) instead of hiding from creditors, making rash promises and feeling demotivated. This system works well if the client follows through by keeping the commitment. (Only suggest this if someone owes many creditors and is receiving collection calls daily).
- Sell What’s Needed: If we sell someone something they don’t need they’ll often put us at the back of the list for payment. Carefully assess the needs. The same applies to selling them more than they need or convincing them to take a longer contract than needed.
- Post-Dated Cheques: Ask for post dated cheques or get them to sign a debit order for their commitment. In most cases debtors will do their best to cover it. They don’t want to negatively affect their banking record.
- Be Flexible: Assess the type of person you are dealing with. Some clients can accept direct-to-the-point collecting and others want to feel you value the personal relationship while you are collecting. We all pay late at one time or another, so don’t get caught in ‘us’ versus ‘them’. They are still people who are often doing their best under the circumstances.
- Use Courier, Cab, or Student: If a client tells you he has the cheque sitting on his desk, suggest that you’ll have a cab, or courier to pick it up right away. Very quickly you’ll know whether he is being sincere.
- Keep The Relationship In-Tact: Many of us make the mistake of going after the money without considering the value of keeping the relationship intact. Effective collecting is when:
– You get the money. (You are effective)
– You do not put the other person down … and …
– You still keep the relationship intact.
Remember: We make huge investments in advertising, marketing, selling and servicing to land and keep the client, yet in one rude or insensitive phone call from accounts you could wipe out that investment. Keep in mind we want to “Collect The Money And Keep The Client”.
- Use Non-Blameful “I” Messages: Be conscious of your language. A blameful “you Message” can often put the other person down and put him or her on the defense. A 3 part “I Message” is much more effective in getting the money, while not putting the other person down and still collecting the money.
Example: “You Message Challenge”:
“You are always paying late Mrs. Client and you don’t seem to care that I have bills to pay too. Start paying on time.”
Example “I Message”:
| 1 Unacceptable Behavior In A Non-Blameful Way | 2 The Concrete And Tangible Effects | 3 Congruent Feelings |
| For the past few months your payments have been arriving late. | It causes a domino affect and it has delayed me paying some of my suppliers on time. | I get embarrassed paying late. Can you help me by paying on time. |
- Don’t Threaten and Don’t Fight: A threat means you are not serious. I’d suggest that you be clear what will happen if the client doesn’t pay and then follow through, but only after using all other tactics. Don’t fight … no one wins. The client’s behavior should not control yours.
- Trade-Offs: If it looks like the client will be a long time paying or is close to going out of business, consider taking products or services to clean up the debt or portion of. Be sure there are no liens. I know of one case where an electrician owed a business money. The business owner got the unemployed electrician to do work for a friend and with the permission of the electrician, the friend paid the business owner instead of the electrician. All three parties were happy.
- Legal Action: Take legal action if you have to. Consult the small claims courts or a legal advisor to ensure you are doing it correctly.
- Humour: With close associates and clients that I have a great relationship with, I’ve often used humour on a 60 day account by sending the following notice that reads like this: “PLEASE COVER OR CLOSE YOUR LEFT EYE AND READ WHAT’S ON THE NEXT PAGE”. On the next page it read: “IF YOU DON’T PAY YOUR BILL THIS IS THE WAY YOU WILL READ FOR THE NEXT TWO WEEKS”. I’ve had clients call me immediately, laughing and promising to pay. You have to know your clients to do this.
I trust these points were a quick tune-up on collecting the money. Let me know about any successes you have with these tips. All the best!
“If you have found this blog article to be valuable for you, I would be grateful if you “shared” it with your Social Media Networks. Also feel free to circulate it by e-mail or other means internally within your organization or externally to your clients, suppliers and personal and business network. Thank-you!” – Bill Gibson
Bill Gibson is a Canadian who is living in South Africa. He is an international speaker and author and a developer of sales, service, marketing, collecting, employee morale building, personal development and entrepreneurial training programs and systems. His blog is www.bill-gibson.com and his website is www.kbitraining.com. He can be reached at bill@kbitraining.com or phone +27-11-784-1720 in South Africa. You can follow Bill Gibson on Twitter: @billgibson1, connect on LinkedIn: https://www.linkedin.com/in/gibsonbill or Knowledge Brokers International SA Pty Ltd Facebook Page: https://www.facebook.com/knowledgebrokers?ref=hl