Do Business Well

If they say they will mail it right out, mark the date that you both agree it should reach you on their file. Keep a record of each phone call by time, date, contact person, and details of discussion. Also keep a copy of all correspondence in the file.

B. Responses to wrong answers. Many times you will be told that they did not receive your copy by mail. Immediately send out a copy of the letter and invoice by certified mail, return receipt requested. If the amount is large enough or important enough you may want to use an overnight service. The key is to use a system that requires a signature. This will quickly eliminate this excuse. Follow up again with a phone call on the day you figure the item has arrived to confirm with your contact that they now have the invoice copy.

Another favorite and well-known response is “The check is in the mail.” A possible variation would be, “The check has been cut and is in for signature.” Again, you need to press for a date by which you both agree the check should arrive. If it doesn’t arrive by the day after the agreed- upon date, it is time to call again. Do not press for check numbers at this juncture as you should still be in the trusting phase at this point.

You may hear that “cash flow is terrible right now,” along with varying degrees of elaboration designed to make you feel sorry for them and confident in their eventual payment. Within reason you will want to listen to and work with your customer as long as they appear to be giving you an honest evaluation of their situation and a workable plan. However, anything over sixty days is unacceptable, and you should make this abundantly clear.

Another perfect response to the cash flow excuse is to be prepared to offer your own sad tale. You just don’t know how you can make payroll if their check doesn’t arrive by Friday. Your banker will require you to put them on COD if you haven’t received their check by the cutoff date for the month.

One of my favorites is to be very sympathetic. “You know, Cheryl, I can really relate to what you’re going through. I have been there myself. I want to help you any way that I can, but there are limits. Can you assure me that you will get me a check by the twenty-second? Don’t tell me you can if you aren’t totally sure. Please, if for any reason you aren’t able to follow through on this promise, you call me before I have to call you. I will respect you more for calling me and telling me that you will be five days late, than for not calling me and being three days late.”

By providing the above information, you’ve set up a complete system of guidelines for your customer to work within. Now if they don’t comply, you have every justification to turn the heat way up.

C. The fifteenth day. By now, you should have determined whether your customer is being honest with you about their cash problems, or whether they are the type that keeps giving you excuses.

For the first group, you will want to start offering some alternatives. Request a partial payment, along with a payment schedule for the balance. Offer to have them return merchandise with a 20 percent restocking charge.

For the second group you will now want to ask if you can pick up the check. This will only be practical for some. However, if you have an account with any of the overnight services, you can order a pickup. Ask your account if you can have DHL or Federal Express pick up the check that afternoon.

Commonly this idea will be met by a new assurance that the check was mailed yesterday or earlier this morning. Now is the time to ask for a check number. You will also want to check the postmark date when the check arrives to see where the truth lies.

D. Thirty days past due is time for action. If you have been using a clerk to make the calls until this time, it is now time for you to call. You will want to attempt to reach the owner (for smaller companies) or controller (for larger businesses).

Your conversation might proceed something like this: “Hello, Mrs. Stevens, this is Bob Barnette, president of Acme Printing. I wanted to take this opportunity to call you personally on a matter that is creating a potential problem between our companies. It is my understanding that your company has an excellent reputation for paying its bills on time. It was on that basis that our firm extended credit to yours.

“I don’t want to harm anyone’s career, but I feel as though Cheryl in accounts payable is not being straight with me. We are very willing to work with companies if they have cash shortages from time to time. However, it is critical that we get information that we can count on during those times. This doesn’t seem to be happening with Cheryl. Can you help me on this?”

This approach will usually result in an answer within twenty-four hours. Use the same techniques as above to confirm the new arrangement: agreed-upon date, Federal Express pickup, partial payment, and so on.

E. At forty-five days after due date it is time to send another certified letter. Go to the trouble to get a “proof of delivery” from your shipper if the product was shipped. Send a copy of the proof of delivery, any previous correspondence, the invoice, and any other documentation you can provide to eliminate another delay because they “need more information.”

Enclose a cover letter to the president (or controller, whoever it was that you contacted at thirty days). Make certain that you indicate that you have mailed a second copy of all the information to the payables clerk, as well.

F. Small claims court. You will want to make one last phone call on the tenth day after you are certain the letter has been received. You may want to ask, “Why are you putting us through this? Is your situation so difficult that you can’t take care of this item at this time?” Dig, dig, dig, to see if you can get an honest answer.

Offer alternatives. Maybe they sell something you can buy from them instead of cash. Maybe they will give you a postdated check. If nothing is working, it is time to file in small claims.

Final thoughts on collections: It is not as important what you say in your collection effort as it is that you make a collection effort. It should be consistent and systematic. If you are having the work done by a clerk, make certain thathe knows your philosophy, method, and the importance you place on this part of his job.

The older an invoice gets, the harder it is to collect. Slow-pay accounts tend to pay first the suppliers who are bugging them the most for payment.

People tend to pay the following businesses last if they are short of funds: lawyers, doctors of all types, accountants, travel agents, advertising agents, and other service providers. Interestingly, some of these folks are also the worst collectors.

G. Collection agencies and lawyers. If you are not very good at collections or your industry has a serious problem with slow pay, you may want to use a collection agency or a law firm specializing in collections.

This is a very expensive method of collection. Small amounts may cost you as much as 50 percent of the invoice total. Larger invoices may still cost 25 percent to 33 percent. The better agencies send out the first letter or two for a flat fee and only begin to charge the larger amounts as they begin to use more expensive collection methods.

In addition to the expense of using this collection method, you will also be likely to end forever the relationship with the customer whom you turn over for collection.

The least expensive and best method of collection is a properly trained specialist employed by your company, with personal backup from you.

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