Posts Tagged ‘non-paying customers’
What to do When Clients/Customers Won’t Pay
Tuesday, April 8th, 2008
One of the most difficult parts of owning and running a business is collecting on accounts receivable. While nobody likes to be the bad guy, you need to have an established procedure to collect the money your company is owed.
The first and most important part of your accounts receivable process is to decide just who you want to extend credit to. With credit cards, debit cards, and EFTs, the customer who needs to have credit really must demonstrate a need for you to establish a line of credit for them.
While you want your company easy to do business with you also are in business to make money and if someone has questionable credit the chances are everyone they try to do business with is going to make sure they can collect the money they are owed.
There are many different agencies you can use to establish credit and usually you can do it online within the same day they apply. Again, the best policy is to collect from you customer at the time you ship goods to them, just like when you buy groceries or have your car worked on. Payment is expected at the time of service.
If you do elect to extend credit make sure you have a credit policy that is signed by your customer prior to extending them credit. Spell out all of the terms including when amounts are due, how much of a finance charge you will levy on balances past due, and under what circumstances you will revoke the credit you have given them.
Ensure that in your credit policy you discuss the collection process and how you will proceed should they become seriously overdue. You don’t want to have surprises when you get to the point of having to collect.
When a customer begins to fall behind in payments it is important not to procrastinate. You need to get all over accounts receivable asap and as the owner or manager of a business make sure you are intimately involved in the details of accounts receivable, it is profit sitting there waiting to be collected or written off.
If a good paying customer falls behind just give them a call and see how things are going. It’s possible they made a mistake and misplaced an invoice or have had a change in bookkeeper or some other legitimate reason. It is also possible they had a bad month and are struggling and the chances are if they have been a good customer they will be very honest with you.
While you don’t want to carry a customer if you jump on the receivable early you can have the opportunity to be a hero and gain a customer for life. If you work with a customer who is having a rough patch, when good times return the chances are they will repay your loyalty and remain loyal to you.
Be careful however to not place your business at risk based on trying to work with a customer, you are in business to make money, you aren’t a bank. While the analogy may be old, try buying groceries and telling the checker you’ll pay tomorrow after you sell a couple of your products. The chances are pretty small they will carry you even for a day so be very careful who you choose to “carry” in your business.
Tags: Accounting, advice, collecting payment, Finance, Finance and Accounting, Generating More Sales, larry Slusser, non-paying customers, Sales, tips
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