Shaking The Money Tree: Managing Slow Payers

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Summary: Slow payers affect every business. Because they can
seriously affect cash flow, it's vital that small businesses have
a system in place to manage them.

Total words: 750

Category: Small Business

Shaking The Money Tree: Managing Slow Payers

Copyright (c) 2002 by Angela Booth

When you're running your own small business, especially if you're
a solo operator, you need four pairs of hands, eyes in the back
of your head, and psychic abilities don't hurt either.

Most of your clients will be wonderful, but some will be
difficult. And unless you have a system in place to manage them,
slow-paying clients fall into the difficult class. If you allow
it, slow-paying clients can damage your cash flow.

My system for managing slow-payers is simple. So far it's worked
well, but I'm thinking of revising it, and following up more
quickly.

=> Get it in writing

If you provide a service, you need a basic agreement that you
automatically give to all new clients. You can tailor this basic
agreement as necessary.

For example, when a new client hires me for a copywriting
project, I send him my Writing Services Agreement.

Here it is ----

<--------------Writing Services Agreement -------->

Your signature below authorizes me to write copy for the project
above, for the fee stated.

Two revisions are included if requested within five days of your
receipt of copy, and are not based on a change in the assignment
brief made after the copy is submitted. Balance of payment is due
on receipt of the invoice.

You understand that the assignment is work done for hire, which
gives you the copyright. You release me from any responsibility
for legal or other problems that may arise from the use of any
copy I write for you.

<------------------------------------------------->

The agreement covers the details of the project, as well as the
terms of payment.

Most clients are good about the agreement, and readily sign it.
But what happens if you have a rush job --- say a client needs
some work done within the next few hours --- and there's no time
for formalities?

Always insist on something in writing, whether you fax them your
own agreement, or they fax you a purchase order. Without the
details of the project in writing, you'll forget what you said,
or they'll forget what they said. It's worth taking the extra
trouble to spell it all out in writing --- however briefly --- so
that everyone's on the same page.

=> The check's in the mail

Unfortunately, even with the agreement signed and sealed, some
clients extend the payment period. I don't concern myself for 30
days, which is probably a mistake.

After 30 days, I follow up, usually with an e-mail reminder. If
there's no result, I follow up again each week, either with an e-
mail message, or with a phone call.

Sooner or later, the client will pay his bill.

To gee up the laggards, in future I'll be following up after 14
days.

=> Tips to keep the cash flowing

* Bill your client as soon as you've provided the service. I used
to allow five days to pass, but since I provide two revisions of
copy if necessary anyway, I invoice as soon as I've completed the
work.

* If you anticipate heavy expenses, bill the client up front for
a portion of them. Keep track, and present your expense sheet for
payment regularly.

* For long projects, bill at stated intervals. Once a week is
reasonable, once a fortnight is too long. Don't continue work
without getting paid. Be inflexible about this. If you allow too
much leeway, you can find yourself working for a month, and
unable to collect because the client is insolvent.

* Check your finance program to see whether it has a reminder
feature. If it does set it remind you to follow up on slow payers
regularly.

* Keep your cool. Be calm, polite and completely professional
when you follow up with slow payers.

Slow-payers are a fact of business life. Put a system in place
that helps you to handle follow ups with them quickly, and they
won't bother you too much.

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