Getting Paid the Most Important Rule in Business

Published: 09/12/2011

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Money makes things happen." Malcolm S. Forbes

Every month I get e-mails from readers with cash flow problems and most stem from poor credit management. Inexperienced business owners are too trusting of customers who wish credit and too trusting that they will automatically pay without a nudge or two. And while I have written about collections many times here is another go at it.

If someone owes you money, can you ask for it? If you hate to "bother" slow paying customers, you better think again, or you may have to get out of business. Like it or not, it is up to you to protect your money. To keep your checking account on the plus side, don't be shy about demanding your money, be careful who you give credit to, and keep your paper work timely and accurate.

If your business requires you to allow customers to buy on credit, take heed and make it your policy that any new customer wishing credit furnish references. Entrepreneurs that have been around for a while will tell you to be suspicious if a new customer demands immediate credit. And be suspicious of glowing references from unknown sources as he or she may be hiding a poor credit record. A wise policy is to treat your customer requests for credit as your vendors treat you.

As soon as you make a credit sale immediately send a bill. Make it a hard and fast rule that no service ever be performed or merchandise shipped without an accompanying invoice. Here is a hint that will help your cash flow- send a duplicate bill as many customers find it helpful to receive two copies- one to keep for their records and the other to send with their payment.

Send monthly statements listing the customer's payments and all unpaid invoices. Some customers may not keep accurate records, even losing or forgetting about your invoices. Sending statements will also alert your customers that you are aware of unpaid invoices and you expect prompt payment. Otherwise, you are asking to be stiffed by less than honest souls.

There is no getting around it, to get paid you must aggressively manage your accounts receivables with consistent collection activity. Here are some tactics that work:

1. As soon as payment is past due, send a copy of the invoice to the customer with a notation requesting their check.

2. When you send out the statement, circle the past due invoices .

3. You will discover that a handwritten note on a statement or invoice is more effective than computer printed messages or past due stamps and stickers.

4. Call your customer asking when you may expect payment.

If none of these suggestions work, you need to be more aggressive. In doing so, you may lose the customer, but so what, if you can't get paid. Loan officers and other credit managers, are well aware of the problem of past due debt- they know that the older the debt- the less the chance of collecting it.

For the tough ones, try these suggestions:

1. Telephone your customer, demanding a check and threaten to turn the account over to a collection agency.

2. If your customer claims to have no money- ask for a post-dated check. If the check bounces, file charges.

3. Visit the customer and demand immediate payment.

4. Have your attorney send a letter demanding payment or you will begin legal action.

5. Be a pest. Consistent and frequent follow up calls will usually get your money.

A must is keeping an accurate payment history of each customer. To do so, establish a method to monitor your accounts receivables, listing your customers with all outstanding invoices grouped by the number of days past due. Accountants refer to this process as "aging" accounts receivable. But don't try it with hand written records, get anyone of a number of small business accounting software programs that contain such aging reports. Your accountant will be able to help you get the right system in place.

Success with your small business is asking your customer to buy your wares, and asking your customer to pay you! Not easy but necessary!

Dr Paul E Adams, Professor Emeritus Business, Ramapo College of New Jersey & Retired Entrepreneur, Syndicated Columnist, Host of the access cable TV program "Tri -State Movers and Shakers," and Author of Fail-Proof Your Business, Available @ Amazon Dot Com. Comments, questions, or suggestions to: