How frustrating is it when you are in business and your precious quality time is taken up chasing overdue accounts? Even worse you have hired someone to handle your administration and their day is taken up chasing the overdues and not able to do the work required?
Have you ever calculated what the cost of that task means to your business? How much money you are losing due tothe lack of customers follow through with payments? I say to my clients “why should you bare the cost when you have already followed them up and sent reminders”.
Here are 3 tips on how to clean up your books once and for all and nip this painstakingly task in the butt.
1) Pay prior your services:
Ever notice your clients are super motivated prior having your services but once you’ve helped them with their challenge, the pain motivator has vanished? In turn they are now stuck with the pain of paying a bill, and aren’t so motivated?
Ever thought of getting payment in advance or at the very least a 50% deposit to secure the work. For some you need to secure the date or any of the outlays that is required for you to purchase to do the actual job.
I have a client who is a designer and does bespoke curtains. Prior me coaching her, she would spend approx $2k on fabrics, then the inks for the printing and would be out of pocket till her customers paid. Murphy’s Law many weren’t paying on invoice time, they had their curtains in their homes and now she’s doing all the chasing for the money. She was seriously in debit and was about to go out of business. All she needed to do was implement a 50% deposit and 50% on completion. (Plus i had her implement the below two strategies as well)
2) Put your clients on direct debit:
Before moving ahead and giving your services place you clients on a direct debit system through a secure online program or company.
I highly recommend for small businesses or soloprenuers a company called quickpay. Why?? The have the lowest direct debit rate and fantastic easy free service to get you started. I’ve contacted them personally and set up an exclusive offer to for the next 30days . Mention: Netty’D and you will get over $2000 worth of set up services for FREE plus dishonor follow up service ….and more. Email them directly to grab all the details.
We are also happy to announce that we have successfully released our new direct debit software managed by our payment gateway Paychoice.
Note: Now this is only perfect if your clients have money in their account you still have the same problem if it declines on direct debit. Meaning you still have to follow it up which means the third option is best angel to take when you are chasing down already overdue payments.
3) Charge Interest on their overdues:
Yep you read right.. why should you have to be out of pocket by using your precious time in continually having to follow up, draft letters, check their part payments, responding to emails of excuses, or taking phone calls of why they can’t pay.
Sending an overdue letter will only do half the job, so I swapped to sending out a very nice letter of warning if clients fall later then 30 days. (I’ve placed an example letter below). I say very nice as I want to always keep the rapport with my clients but they need to know you’re not a charity service or a push over.
Business is business, and for me there was a time a kept listening to their stories but it was my business who was suffering in the long run from not being able to do other high priority tasks.
So I now charge a 5% fee of the overdue invoice, this is for each 7 days it falls overdue and also by third week we’ll send off to debit collectors and the client will reap the costs of that too.
Sounds too harsh? Would you do it if it works?
For me I was sick of wasting my time on those cases, and if anyone knows me I’m a stickler for time! If you don’t respect your time, no one else will! Your time is money, and your time should be focused on building your business. So I choose to do this gracefully but firmly as mine and my administration assistant can focus on growing the business with quality clients not wasting time on other peoples lack of respect.
Here’s my example of a NICE yet FIRM Letter :
Email Subject: Immediately Action Required
Warning Overdue Account.
We want all our clients to flourish with success through our services. To continue working with you, we require your overdue account to be cleared up immediately.
Please fix up the total sum of:
Payment to : Account Details
Note: Please be aware even though we love to help our clients we are very strict in chasing payment and do not want to be put into the situation of using a debit collection company. We urge you to take immediately action.
If payment is not settled by ___/___/___ please understand you will put us in the position of charging an interest of 5% that will be added to your overdue account for every 7 days it goes over and the cost of any debit collectors.