Believe it or not, if you’re in business, you’re in collections! I remember the first time as a business owner I came face to face with that reality. For many years, my clients paid on time or they paid in full. I soon came to realize that clients having payment difficulties was something that I not only would have to contend with, but I also needed to frame a way to handle it that allowed me to support and serve my clients while maintaining my fiscal responsibility. That is exactly why when I saw Amanda’s question this week, I got excited (at this point after 9 years in business, I’ve seen most things!)
Check out Amanda’s question:
“Hi Darnyelle this is a little embarrassing for me to admit. For the last few months, I’ve been running into clients who aren’t paying their bills! Help! I know that I need to wrap my hands around this or else I’m going to have a big problem on my hands.”
See my response to Amanda’s question in this week’s episode of Incredible Factor TV:
As I share in the episode, most business owners don’t like the part of the business when they have to follow up with clients that aren’t honoring their obligation, but it’s par for the course. What I mean is, you can’t escape. Every business large and small has to deal with slow or no payments and you’re not exempt. When I am working directly with my small business owner and entrepreneurial clients, I will often suggest that they create a collections policy and system as a part of your client management system.
Please note: a Client Management System is just one of the seven systems I recommend that every small business owner have in place. And the Client Management System covers a multitude of things, including your collections process.
In my own collections system, we sought to look for opportunities to automate. So, when a payment doesn’t process, the client immediately gets a notification. Often the notification is enough for them to contact the office to update their payment details. On occasion, the notification doesn’t resolve the issue and that is when I recommend the following three keys:
1. Determine how long you’re going to allow before you start your collections procedure. There are different schools of thought here. Some say, it will work itself out (I don’t say that.) I tend to say that the early bird gets the worm, so we reach out right away with that automated email. My team checks in after two days have gone by. Our goal and one of the KPIs we measure is how quickly we resolve payment issues and our goal is to resolve before the 4-day late fee is incurred by a client.
2. Keep track of your clients and their payment schedule. Be sure that you or someone on your team knows when your clients’ payments are being processed. If you don’t use a CRM that allows for e-commerce and automated payment processing, be sure that you process payments when they are due. This way, as soon as a payment doesn’t go through you can work to resolve the issue with the client easily. It may be easier to have someone else follow up with clients when they need to be contacted about a payment so that you don’t feel uncomfortable in rendering service to your clients. Regardless make sure that you are clear about all clients and their payment schedules or better yet, make all of your client’s payments occur on the same dates – choose the 1st of the month or the 15th for ease and simplicity so that you know when to expect their payments.
3. Develop the full process for collections. At what point will they get a letter in the mail? How many calls will you make? When will you stop rendering service? When will you involve your attorney? All of these questions and more need to be answered as you think through your collections process and system.
Now I want to hear from you: What’s your two cents? How have you dealt with client collections? What best demonstrated practices have you developed?
Understand client collections is just one of the many moving parts of business that you’ll need to know and utilize to grow. Need help growing your business? We should chat.
©2017 by Darnyelle A. Jervey. All Rights Reserved. Darnyelle A. Jervey, MBA, The Incredible Factor Business Optimization Coach and Mentor, is the founder of Incredible One Enterprises®, Incredible Factor University® and the Leverage Your Incredible Factor System®, a proven step-by-step program so you experience financial and spiritual abundance in your life because of your business. For more information and a FREE audio CD “7 Critical Mistakes Even Smart Entrepreneurs Must Avoid for Clients, Connection and Cash Flow!” just fill out the form below.