May 1, 201301:36 PMOpen for Business
with Jody Glynn Patrick
Dealing with late-paying customers and (why not?) business bloggers
(page 1 of 2)
Actually, I have two topics intertwined this week. First of all, IB accepts and publishes blogs and “open mic” pieces. I write two weekly IB blogs and also blog for clients such as TDS that have a high-end management audience segmented out for executive-level business communications. Before writing about any business subject, particularly for a client company, I research what other online bloggers have written. Then I have two options: either credit their advice as a source or expert link for my business reader, or make my own advice more practical and pointed, oftentimes turning to my own contact list of subject experts, etc.
What constantly amazes me when reading business (versus personal) blogs is the lack of practical advice put forward. In my opinion, too many business advice bloggers tend to wax (a) very philosophical, (b) very tangential, or (c) very academic.
As an example, in preparing a blog for you today on the topic of collecting past-due accounts receivables, I just read an article posted by a director of community relations for a receivables management company. In that blog, provocatively titled “How to Deal With Deadbeat Customers,” the author offers bulleted advice to 1) factor the invoice (sell the invoice at a discount), 2) file a lien (common practice in construction trades), 3) call a lawyer to write a scary collection letter (hint – think through the cost-benefit part of that equation first!), 4) hire a collection agency, and/or 5) write it off. Debts older than six months, the author asserts, are usually uncollectable.
Admittedly, those are all interesting options, but my advice is tempered by the desire to actually keep said customer, if possible. Not once did the writer suggest talking to the customer. She did not even qualify her advice by saying “after all efforts to collect from the customer have failed” but instead says that there are always going to be “some customers that won’t pay on time” and that these are the five ways to deal with “late-paying customers.”
IB has an incredibly high collection rate. We do not write off debt as a fifth, sixth, or even seventh option. We have seen too many companies experience cash-flow issues of their own because of late or write-off receivables from customers. We can’t afford to play the role of bank lender or credit agency and, at the same time, maintain the financial health of our company. But we do understand cash-flow valleys and peaks, and so we do allow a limited dollar amount to be “staged” for ongoing payments from repeat customers who demonstrate the ability to pay the balance on a schedule that meets our approval.
We treat customers the way we appreciate being treated. Our overall collection approach is to establish clear and respectful communication between both parties, and so we: 1) clearly state on every contract when payment is due, and 2) for invoices that are now between 30 and 45 days late, we connect directly with a top company executive (versus the bookkeeper) at least every week with the expectation of collecting the balance or establishing a date-specific payment schedule for the remaining balance. (Continued)