Collecting money.... the worst part of my job

Hello everyone,

I have owned my own business for a few years now and love it (up's and down's) the only part that I hate and yes HATE is calling people to collect money

Most are late (a few pay early) some are over 30days late, but I feel that I should take PO's

I can't stand when they do not answer calls and/or emails (these are all US companies)

Anyone else have the same problem? have you done anything that helps them pay? (on time)

More important... anyone not have the problem?

The problem is getting worse, and large companies with lots of $$$ are generally slower paying than small companies.

A few strategies that I found helpful back in the day:
- offer a discount for early payment, for example net 30 days, 1/2% discount net 10
- indicate on your proposal and your invoice interest charge for late payment (say 1-1/2% per month for late payment)
- call a few days before the payment is due, and indicte you are just making a courtesy call to verify that they have received the invoice
- if they run late by a week make another "courtesy call" to verify that they have received the invoice and ask when payment is scheduled
- if they get past 60 days (30 days past due) have someone besides yourself call. They don't need to be nasty, just firm in indicting they are calling because the payment is past due. My wife was great at this. For some reason she could scare the he!! out of contractors. I also had a buddy that was a retired opera tenor that was great at this as well.
- if they get past 90 days notify them that you are cancelling their warranty and will not provide ANY support until paid in full. You have to do it, too, sometimes

If a customer is a chronic bad actor refuse to quote them next request. Life is too short to put up with that BS.

The only advice I can give is the squeakiest wheel gets the most oil. Therein, Company bean counters know and use tactics. By now they already know you don't like asking, so you wait the longest to be paid. Can you see where I'm going. The longer the money stays in their account the more interest they will gain. Its their job to do this. Money is not a dirty word (Especially when it is due to you) you will have to be more forceful when you speak to the finance controllers. Try and get a member of the company that you did the work for, (maybe a senior engineer or maintenance manager) to speak to them on your behalf. It has worked for me in the past, and also try and build a relationship with the person in finance that you call. Hope this helps. Regards Badger.

Yes I too have the problem. Generally speaking I have just come to accept it. My terms are 30 days. Most pay in about 45 days, my largest customer pays within 7 to 14 days which is fantastic, but some pay in 60 to 120 days. The ones over 60 days are the ones that frustrate me. And usually its on a service call for a few hundred dollars. I've never understood that.

I agree with Tom that larger companies tend to be the worst. There's also alot more red tape to cut through with them. Smaller companies I typically only need to call the owner and I'll get my cheque.

The longest I've gone to get payment was for 6 months from a U.S. company for a $500 service call and it happened twice in a row. The line was down and I dropped everything to go and help them out on both occasions. I sent past due notices and called and it didn't make a difference. Once I finally got paid for the last service call I refused to go there again and I still will not go to this day. Its not worth the hassle to cross the border for a service call that will take 1/2 year to get paid for and will only make me $500. They have called since and said they will pay cash when I arrive but I've told them to get someone else.

I guess you have to be prepared to walk away if you're not willing to live with the actual payment habits.

rstech said:

They have called since and said they will pay cash when I arrive but I've told them to get someone else.

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Just have them send you a check, and tell them you will be there exactly 6 months after it clears...

I'm not a 'people person', so my business partner deals with our late payers. I will say that offering a discount for net 10 has worked quite well for us.



-Eric

Let me call them for you!!! My accountant (Mom) makes those calls for me.
About 2 years ago I told a Guy I would be there Friday to get the check or my equipment. I offered him the choice. I walked in to the office with a tool bag ready to take my hardware

Devil's Advocate

Waiting 60 days for a payment is not that uncommon. When someone invoices us it has to go thru several channels before it is paid. While we are not a big company it is worse for larger ones. First, once the invoice is recieved it has to be proven either work was done or parts were recieved. This is usually done thru accounting software and the accounts department asking the person who issued the PO if a reciever was not completed. Then once this is complete ( can take as longs as 2 weeks depending on the work load at that time) then the bill is moved to the "be paid" pile. These are generally procesed in the following month once the ledger has been balanced for the previous month. This also takes aprox 2 weeks. Usually what I find when I have a complaint from one of my vendors, something has gone screwy with the paper work. Most common is slight changes in part numbers or invoice not matching PO. With service work it is even worse. You really do not have a part number you have a job description. Which to an accountant means aboslutly nothing.

My suggestion. If it is a medium to large size company do not expect payment inside of 60 days. Though as others have said do call at the 30 day mark so it doesn't strech into 90 days.

One other thing that was mentioned is a "credit hold". Tell the customer no parts or service until previous bill is paid. This gets things moving suprisingly fast. Also when you call have a copy of your invoice and know who your direct contact was. This helps alot also.

I used to grip alot about the slow payment until I got a good look at what all our accounting department has to do to pay the bills. I just hit on the highlights here. Usually the person cutting the checks has several other jobs besides just cutting the checks.

geniusintraining said:

Hello everyone,

I have owned my own business for a few years now and love it (up's and down's) the only part that I hate and yes HATE is calling people to collect money

Most are late (a few pay early) some are over 30days late, but I feel that I should take PO's

I can't stand when they do not answer calls and/or emails (these are all US companies)

Anyone else have the same problem? have you done anything that helps them pay? (on time)

More important... anyone not have the problem?

Click to expand...

A few things come to mind....

Make sure your job report includes all the boilerplate you'll need if you DO have to start collection actions against them, and that by signing it they agree to pay, pay on time, and/or pay all interest and/or collection costs that become necessary.

Don't wait until they're so late that you're angry before you call. Do your homework and make that first call when the payment is only a little late.

Make the first call with the mindset that they WANTED to pay on time, and there must be some mistake. You're just helping them do the right thing.

The reason the biggest companies "play the game" is because of a simple principle they adhere to: "Your net worth is not what you own, but what you have control over." They are juggling YOUR money/debt along with all the other debt/assets they control at any given time. The more they have up in the air... the more they HAVE. It's a fuzzy kind of accounting that's all too common. It's sad, but it is cold hard fact. But in doing so, THEY have control over the equipment and work you've done, AND they have control over the money they must eventually pay you. At the same time YOU (and all the other vendors they can stall) have NEITHER.

In MY state there is a document you must send to the owner of the real property on which you have supplied parts/labor, appropriately called "notice to owner". Without this notification, you almost CAN'T prevail when trying to collect a debt in court. Sending the notice-to-owner lets the customer know you are savvy, and serious. Vendors who DON'T send a notice-to-owner are the ones whose debt is easiest to "juggle". Find out how (eventual) litigation-based collection works best in your state, and make sure the client knows you've laid all the groundwork.

Chronic abusers are often not worth the trouble, especially to a small business with minimal funding to start with. The ups and downs will kill you.... if the downs all gang up on you at the same time. You can either go "C.O.D." or tell 'em to take a hike.

Hope this helps.

Stationmaster

Clay B. said:

Waiting 60 days for a payment is not that uncommon. When someone invoices us it has to go thru several channels before it is paid. While we are not a big company it is worse for larger ones. First, once the invoice is recieved it has to be proven either work was done or parts were recieved. This is usually done thru accounting software and the accounts department asking the person who issued the PO if a reciever was not completed. Then once this is complete ( can take as longs as 2 weeks depending on the work load at that time) then the bill is moved to the "be paid" pile. These are generally procesed in the following month once the ledger has been balanced for the previous month. This also takes aprox 2 weeks. Usually what I find when I have a complaint from one of my vendors, something has gone screwy with the paper work. Most common is slight changes in part numbers or invoice not matching PO. With service work it is even worse. You really do not have a part number you have a job description. Which to an accountant means aboslutly nothing.

Click to expand...

I respectfully disagree, Clay. In my opinion Stationmaster has the correct interpretation.

I've set up accounting systems and did all of the entry starting back in the day when it was manual entry in a bound journal, going to accounting software in my own business, to a large coporate accounting system when I sold it.

It may take a week or two to get approval on a service invoice. The rest of the delay is because large companies prefer to manage their cash flow on their supplier's back. Let's face it - the data entry into accounting software and issuing checks is only a few minutes per transactin. Large companies understaff A/P (Accounts Payable) to save money and because they want to stretch terms anyway. Most of the time the delay is because the invoice and authorization is sitting in a basket on some A/R clerk's desk for weeks because they don't care and the company is paying in 60 days anyway.

I used to work for myself and I feel your pain. I used to adjust my terms depending on how bad a payer the customer was. If it was a big job I asked for 40% up front, 50% on completion and 10% after satisfactory commissioning. If it was a small job (i.e. a call out) then I just used to do the work and put the bill in afterwards.

I had a couple of bad payers (I also had a company that went into liquidation owing me a lot of money - very very frustrating and upsetting). I had cheques bounce and false promises.

Every new customer got the benefit of the doubt but if they abused that trust then my payment terms went to either 80%, 90% or even 100% up front. If they didn't like the terms they were free to find someone else.

Big companies tend to pay a lot slower (as has already been said). A lot of the times its the mindset of the big companies that "if you are not a big enough supplier to be able to wait for your money then you are not big enough for us to deal with".

It's tough but there is some great advice in this thread. Specifically, getting in touch with the maintenance manager / electrical manager that you did the work for and getting them to chase it in-house. That always worked well for me.

geniusintraining said:

Anyone else have the same problem? have you done anything that helps them pay? (on time)

More important... anyone not have the problem?

Click to expand...

We put customers like this on settlement terms with accounts, they get 25% settlement discount if they pay within 30 days (or 30 days end of month), the 25% is added on to start with . If they dont pay on time, its worthwhile !

Any that are constant bad payers or mess us around we get shot of as we cant stand the

If it s a new customer (or large order with an existing customer) then its 50% with order, 25% when ready to ship and 25% on 30 day account after commissioning

Hello,

Never done it myself, but have heard of people putting a "bomb" in the code and password protecting it when dealing with a "slow paying" customer. Having machine shut down at a specified time with no recourse would certainly make a statement. Programmer shows up and gets a check before removing the bug. If the customer pays on time a simple stop in to remove the corrupt code and password and everybodys happy.

-Dave

I think you'll find an almost universal dislike of that mechanism here, Dave, though I've also seen it done for machines that are leased, not sold.

Does anyone here on the Forum get paid by credit card by their clients ? It seems that the 3% fee is a pretty good equivalent to the processing cost of an invoice, for small ones.

dploof23 said:

Hello,

Never done it myself, but have heard of people putting a "bomb" in the code and password protecting it when dealing with a "slow paying" customer. Having machine shut down at a specified time with no recourse would certainly make a statement. Programmer shows up and gets a check before removing the bug. If the customer pays on time a simple stop in to remove the corrupt code and password and everybodys happy.

-Dave

Click to expand...

Not only is that mechanism disliked by all as Ken points out, but you have to use it with discretion. For example, my customers were all municipalities, and in some states I believe that it is illegal to use that device on their projects.

I agree completely Ken...Just stating that I've heard of it. Definetly wouldn't do it myself.

In my case I am lucky...I do all the system design and programming for my company, which pays me by the hour(not enough!)...every week. Don't have to worry about that kind of stuff.

-Dave