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Hello everybody, I hope you’re all doing wonderfully today, and I want to thank you for joining me once again for another fantastic blog post. Today we’re going to discuss how to have amazing collections. Or in other words, ways to collect your money. More specifically, we’re going to cover five tried and true steps you can take to collect your money as a small business owner.
The problem oftentimes is that many businesses do a fabulous job selling their services and they’re awesome at making the sale, yet at the same time they have a problem collecting. Now, I know that every industry is a little bit different, so this may not directly apply to some of you.
That said, the following advice should be helpful to anyone who has ever had a problem collecting. These five steps are all things you should think about in order to move forward in the process of collecting. Doing so will reduce and even eliminate a lot of stress and pain in the future.
Before we get into the steps, however, I’d like to discuss what the main point is here. From an accounts receivable perspective, you have to figure out how quickly you want to have your money and then make that your goal. You might say “We want to have 70% of all our accounts receivable within 30 days or less”, for example. If you want to think really creatively, you might think outside of the box and go “How can I actually collect money before I perform the actual service?”. This is certainly something that they do in some industries.
For many of you, though, the idea here is not to revolutionize your mind (although there’s certainly an element of coaching that does that). It’s more about being more practical and taking steps to collect faster. The main point is just to have a goal regarding what you want to accomplish with your accounts receivable, whatever that may be. With that being said, let’s dive into the five steps!
1) Contact: This step is all about the importance of proactivity. It’s vital to be proactive immediately. So as soon as you send an invoice to a client, reach out to them. This might be via phone or email, but in any case, make sure there’s some type of response that confirms that they received your invoice. I would start off by doing this with every one of your clients, because sometimes people actually don’t receive an invoice, or they later claim that they didn’t.
Not every business is particularly organized, so for some people the invoice genuinely just gets lost. In other cases, people are a bit deceptive and just claim they never received it to begin with. With that in mind, it’s important to get confirmation regarding your invoice right off the bat. Email confirmation is best, of course, but verbal confirmation is also an option.
Now, if you have some clients who always pay on time and feel that doing this with everyone would be impractical in terms of your labor capacity, there are modifications that can be made. In that situation, just focus on new clients or those with questionable jobs. If someone is new, has had issues paying in the past, or there’s anything going on that you’re a bit wary of, you could focus your immediate contact process on them. If you have the capacity, contact everyone, but it’s okay to narrow your focus a bit if that’s not the case.
2) Document: As soon as an invoice is overdue, contact the person via phone or email immediately. After that, repeat your attempts to contact them every three days until your attempts are successful. Oftentimes, you’ve got an accounting department and they’re the ones who are making these calls every three days.
It’s important to make sure that when they do communicate with someone they make notes of the who, what, when, and how. Who did they talk to, what was discussed, when will the payments be made, and how will they be made? Once you finally make that contact, it’s crucial to have it documented, whether it’s in your accounting software, a CRM where you keep client notes, a spreadsheet, or even on a piece of paper.
3) Sales: Let’s say your attempts at contact are unsuccessful. At this point, it’s a good idea to get someone on your sales team to reach out to the individual. I know some of you reading this might be really small, to the point where you yourself are actually all these different departments. For companies that aren’t quite as small, however, it’s a good idea to reach out to the sales person, who has a relationship with the client and can reach out to them.
4) Management: If after all these steps are taken there’s still no contact, then it’s time to go up the chain to upper-level management and let them know in detail what’s going on. It’s certainly good to let them know as you go through this whole process, but at the very least let the know that you’re at a stopping point. Once you’ve had this dialogue with them, it’s time to move on to the fifth and final step.
5) Legal/Company: Following a discussion with upper-level management, you’re going to want to make a decision about whether it’s time to send this to a collection agency or if there will be legal action taken. Sometimes you might want to send a letter expressing your intent to take legal action. Again, I’m just giving ideas, I’m not saying to do any of this exactly. However, if you have a lawyer send off a letter that helps you get your money faster, and the same can be said if you make use of a collections agency. Sometimes people need that extra spark, and you’ll get paid soon.
So there you have it! Those are the five steps for collection, and the most important point is to be proactive. The things you do at the very beginning will definitely help you towards the end. It’s really about proactivity. If this is something you struggle with, or there are any other issues regarding running a small business, sales coaching, or business consulting that you need help with, feel free to call us. In the meantime, go out, be proactive, and have a better than amazing day!
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