By Andrea Pohlsander:
A few weeks ago I was watching an 80’s classic movie marathon, and while enjoying the likes of Footloose, Willow, Pretty in Pink, Say Anything, and my personal favorite, Goonies, I came across the weird, slightly dark, and hilarious Better Off Dead. As a very young John Cusack struggles with his teenage angst, their paperboy is struggling to get paid for his services. While nobody should ever go to the same extremes to collect a payment, there are some accounts receivable lessons we can all learn from him.
1. Clearly Outline Time, Services, and Cost
“4 weeks, 20 papers, that’s two dollars, plus tip.” Clearly defining the terms for repayment before or right after signing the client is helpful. That way, you aren’t leaving it to chance that your client will review the conditions when they receive their first invoice. Additionally, include the terms for repayment on each invoice. Consider removing phrases like “due upon receipt” which leaves too much room for interpretation. Instead, indicate the repayment timeframe in the number of days, for example, net 30, or 30 Days after receipt.
2. Check Your Contacts
Asking the parents for the payment would have made so much more sense than chasing after the teenager. Verify that you are sending the invoices to the correct individuals. If needed, request the accounts payable contact(s) and make sure to copy them on future invoices.Learn how you can improve your #AccountsReceivable practices and improve #efficiency for your company from @RBM_Andrea Click To Tweet
3. Add Some Flair
Gotta love that switch-comb. Money is a serious subject for just about everybody, and it can be incredibly stressful. That doesn’t mean you have to be the growly wolf at the door. Make sure to keep things personable. Your call or email, requesting payment doesn’t have to be the worst thing that happened to your client that day. Be careful to maintain a pleasant but firm tone.
4. Be Tenacious
When a client misses a payment, it’s easy to be tempted to let it slide to avoid confrontation or to have the complete opposite reaction and be too harsh. Neither of these is a good habit.
At Red Branch, we use a different approach. Once a client misses a payment, we send them a reminder with their new invoice that their previous invoice remains outstanding. Then we schedule follow up reminders for two weeks and later one week, before their next due date. Make clients aware if you apply late fees to past due invoices. Also, advise them if you have procedures like pausing services if they have three unpaid invoices. Consider being willing to work with people to come up with a payment plan if necessary. While it’s not ideal, it’s better than not getting paid at all, or souring a client relationship. Set up a dedicated calendar with reminders to follow up unpaid on invoices. Or if you have clients that consistently pay late, to remind them when a payment is about to come due.
5. Don’t Be Afraid to Ask for Help
Intimidation is probably the worst accounts receivable method. However, when all else fails, and you’ve done everything you can do, don’t be afraid to bump unpaid invoices into collections. Be selective about which company you choose. Make sure they are legit and have ethical business practices. Remember that you honored your contract, the client needs to hold up their end too.
Collecting payment from your clients doesn’t have to be stressful or a nightmare. Remember to be clear, personable, verify your contacts, don’t give up, and don’t be afraid to ask for help. Keeping consistent collections practices has a positive impact not just on your company bank account, but the efficiency of overall operations.
Do you have a tried and true tip for collecting payment? Share them with us @RedBranch!