The Art of Getting Paid
The running of a successful business is a play in three acts: 
- Getting the business in the door;
- Providing the goods or services in an exemplary manner; and
- Getting paid…on time, every time.
The third and closing act – getting paid – is what separates a business from a hobby. When you do work, you deserve to be paid everything you are owed, on time, every time. How far short your company falls from this standard constitutes the measure of your receivables problem. What you do to make up the difference measures your determination to benefit from the fruits of your labor.
In most cases, the art of getting paid can really be defined as the achievement of balance between the customer’s tolerance for legal paperwork and the business owner’s exposure to the risk of non-payment. Every business, with the exception of those which conduct 100% cash on the barrelhead transactions, should be protected by standardized forms and a well trained office staff.
The forms, ranging from master account agreements, account applications, estimates, or invoices all accomplish two vital missions:
- Protection of the business from the risk of non-payment; and
- The provision of an incentive to slow paying customers for prompt payment.
These terms include finance charges on overdue balance, the right to collect court costs and attorney’s fees in the event more formal collection efforts must be pursued, the selection of a friendly and convenient location for litigation, and the limitation on possible counterclaims.
Each of the terms listed above, and a number of others custom tailored for each business, not only provide protection for the business owner, but also provide an incentive to slow-paying customers for prompt payment of your account. The incentive can best be described in reverse. I once had a client who incorporated a finance charge of 6% per annum on all balances due and unpaid after 30 days. 6%! This means that my client was actually providing non-paying customers with a loan at 2% below prime. He was, in short, not a squeaky wheel.
Slow paying customers must be given an incentive to put your invoice at the top of the pile. That incentive can be a discount for prompt payment or serious penalties for non-payment. Either way, your invoice is often in stiff competition for the attention of customers of limited ability to pay. Your goal as a business owner must be to position your account to win that competition.
Toward that end, there is no substitute for persistence. Follow up calls within 15 days after the passing of a due date are mandatory. It is equally mandatory that the tone of these calls be professional and friendly. Anyone who has ever been on the receiving end of such a follow up call knows the difference between a call requesting attention and one guaranteed to lose a customer for the caller’s business. Nevertheless, those calls must be made, along with well worded follow up letters and consistent efforts to remain in contact with trouble accounts.
Finally, each business owner must continuously fine tune his or her approach to collecting past due accounts based upon quantifiable results. In essence, each business owner must perfect for themselves the art of getting paid.
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