NFIB

Safeguard Your Business With Payment Procedures
01/ 21/ 2003

by Vicki Gerson

It's probably happened to every small business owner at least once. A new client who seems trustworthy uses your goods or services--and never pays you for it. What can you do to handle a new or untested account? Setting up some safeguards is always best.

One of the easiest ways is to have a "cash up front" policy for all new accounts. Have this information in writing. Make it a company policy that before goods are shipped or services are performed, the first order must be prepaid. To soften the blow, you could offer a 5 or 10 percent discount for prepayment or give the customer free shipping.

Another option that may be satisfying to you and the potential new customer is to ship part of the order or perform a trial service to show good faith. Make sure you receive payment before proceeding further with the client.

You may also want to check out the credentials of your potential new client. Ask for references from other businesses they've worked with. See if they belong to the Chamber of Commerce or other professional organizations. Just make sure that whatever your policy is toward new customers, your safeguards must apply to everyone. Otherwise, you could offend people who could turn out to be valuable customers.

Unfortunately, you may come across clients who pay the first or second time, and then start avoiding payment when they think you may not notice right away. In this situation, don't waste time. Pay attention to all past due accounts. The longer you wait, the less successful you will be collecting the money that is owed to your business.

Be a pest! Call once a week. Leave several voicemail messages if you have to. Also think of a time when the business owner may answer the phone--early in the morning before the office officially opens, very late afternoon or after business hours. Also, send a copy of the unpaid bill every week with a note stating how long the bill has been overdue and that payment is needed immediately.

If you make verbal contact with the individual, don't scream or be hostile. This behavior won't get you paid. Be friendly but persistent. Tell the person partial payments are acceptable, and try to work out a payment plan.

If it appears you won't get your money by dealing with this individual, you have two choices. Either drop it and consider it a loss, or consider hiring a collection agency. Most collection agencies only get paid if you get paid. The agency may take one third to one half of the outstanding amount, but that is usually better than collecting no money at all.

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