- September 29, 2011
- Posted by: Paul Foster
- Category: Business financial help, Grow a Business, Managing business revenue
I have a small business owning client who I consider to be the best at collecting money from customers.
Quite a few years ago he actually went to jail trying to collect money from one customer because he tipped a desk over on him! – We don’t recommend that approach!
Have a conversation before the sale
This conversation results in a few things:
– You assess whether you should give any credit to this customer. If there are concerns, you must be courageous enough to ask for full payment upon completion of the job.
– You determine the payment terms up front and document them as part of the sale. This is the point in time you have the leverage to ask for these terms because the potential customer is also asking you to perform your product or service offering for their benefit. It is then implied that if you perform the service or provide the product for the customer then they will pay you according to the agreed upon terms.
It is important to recognize your responsibility to perform the service or provide the product as you have agreed. The problems with collections are often not the actual problems. The collections problems are often a result of problems with product or service delivery.
In summary the simple secret is to have the chat about pricing and payment terms up front before the sale – every sale.
By the way, my small business client who collects money so well also pays in a timely manner. First he has the cash-flow to do so and second he knows a quick paying customer receives better service – as they should.