In Part 1 we discussed the importance of Establishing and Enforcing Payment Terms.
In Part 2 we discussed Setting Up Payment Protocols.

One of your responsibilities as a business owner is to ensure you get paid. It seems so simple but the reality is, regardless of whether times are good or bad, there are sometimes clients who can’t – or won’t – pay. A client who doesn’t pay is not really a client at all.

A business owner emailed me recently. He wrote:

“I have read a few posts about your ways of handling customers and terms and conditions. I have only been working full time for a few months and wondering if possible if you could forward me a good example of terms and conditions. I have a [client] that is being useless about paying his accounts and stupidly did not [have agreed] terms and conditions…

“I have met a few people in my travels now who say this [client] is bad at paying on time and now I have to start playing hard ball as they do not answer my nice questions and phone calls. Any help or advice would be much appreciated.”

Getting paid is always a valid concern, and a key to your success as cash flow is the lifeblood of every business. The writer above is right; slow paying customers are a pain and a drain on your business, and customers who don’t pay are not customers at all – they’re a liability.

Some business owners may argue: “But I can’t afford to lose this customer”. To that, I ask: “Can you afford to keep them?”

That said, there are a few things you can do to improve collections from commercial clients. When a client doesn’t pay on time, or makes only a part payment, make a point of asking if there is a problem. You should not be reluctant to ask them straight out: “Is there a reason your account has not been paid?”

If there is a problem with your service or a misunderstanding of some sort with billing, then you want to get this into the open right away.

When a client is experiencing difficulties making payments, rather than make demands, it is better to ask them what payment arrangements they can manage. Make sure their offer is not under duress from your call.

Simply enquire: “What payment arrangement are you offering?”

If you find their offer acceptable, be sure to document it right away and post/email your understanding back to them, being sure to request a reply. You can use the following text:

“Thank you for your offer of $X per [period] to settle your account. We accept your offer and anticipate your faithful and regular payments in lieu of proceeding with ‘elevated enforcement action’.”

If their offer is not acceptable, then proceed with debt collectors. Don’t threaten legal action if you have no intention of proceeding as they may just call your bluff!

Put your business – and your paying clients – first

Considering how much time, effort and frustration goes into chasing overdue accounts, you’d have to agree that non-paying clients are actually a liability for your business. Don’t get caught in the trap of extending softer payment terms because you don’t want to lose a client. Think of the savings you’ll achieve by not having to chase him up, and the time you’ll be able to better direct towards looking after your valuable clients who do pay.