Nobody likes the idea of resorting to a collections process to deal with delinquent accounts. Indeed, some entrepreneurs choose to do nothing rather than confronting customers about past due bills.
Nobody likes the idea of resorting to a collections process to deal with delinquent accounts. Indeed, some entrepreneurs choose to do nothing rather than confronting customers about past due bills. That may delay any unpleasantness and hard feelings indefinitely, but it won’t bring what you’re owned any closer to your bank account. Though many of the negative connotations of collections are exaggerated, the process itself can often be avoided entirely by adopting and adhering to sound accounting and invoicing practices. Author and entrepreneurship consultant Terri Lonier, president of Working Solo, Inc., provides these tips for improving your invoicing habits:
Invoice promptly! If your customers don’t have the paperwork, they can’t pay you. And the longer you wait to invoice, the more distant your client’s memory of the product or service you provided will be.
Invoice clearly and completely. State all terms and the circumstances of the business exchange. A vague or incomplete invoice will make collecting more difficult, especially on an overdue account.
Know your customer’s invoicing and payment policies. Do they need multiple copies of the invoice? Must the invoices be original hard copies, or are faxed or emailed invoices acceptable? Should the invoice be included inside a shipment or be sent to a separate department? In many cases, if you don’t enter the system properly, your invoice may be delayed—or never paid at all. Accurately record each payment you receive to keep your accounts current. It’s unsettling to have to pursue an overdue account, but it is humiliating to ask for a payment you’ve already received. You’ll come off as unprofessional and may jeopardize a good client relationship.
Don’t get lost in a large-company shuffle. Call the accounts payable department a few days before a payment is due and politely ask if the invoice has been processed properly. Invoices often have a way of getting lost along the payment route. Large-company accounting departments also frequently delay payments to small companies and independents to manipulate their cash flow.
Take action the day an account becomes past due. Call or send a second notice with a polite reminder. A fax or emailed attachment carries with it immediacy and creates a visual image that often generates better response than a phone message. If you still don’t get paid, phone the customer and request payment. Stay proactive. If you don’t, your weak demeanor will make it easier for your client to put you off.
Collections are just one critical financial issue your small business can face. For expert help and advice, contact SCORE “Mentors to America’s Small Business.” SCORE is a nonprofit organization of more than 12,000 volunteers who provide free, confidential business mentoring and training workshops to small business owners.