| Late paying customers can throw a business into a cash
crunch.
In this eNews, we learn from the experience of Rick
Roberge, who specializes in collecting Accounts Receivable
for businesses. This continues our 'from the trenches'
series in which we showcase the expertise of professionals
with whom we work collaboratively.
Rick has been a 'bill
collector' for almost twenty years. He sees the
pattern over and over again. Business
owners are so busy selling and working to make their
business a success that they don't take the time to
follow up on slow-paying customers.
Running out of cash
is the most common reason that businesses fail. It's
possible to be profitable but cash poor because of late
paying customers.
Collecting Accounts Receivable quickly
is a fast way to bring cash into the business. And,
every day Accounts Receivable are not collected, the
more likely the company will be strapped for cash.
Rick's
advice is 'Collect the easy ones first! Gently
nudge the 30-45-60-day accounts first. Gently! New
accounts require much less work to produce big results.'
Set up a system.
Rick advises business owners to
set up a system and follow up promptly on all late payments. At
least monthly, review all unpaid accounts and call or
send a follow-up notice.
- Follow up gently.
In Rick's experience, sometimes there are valid reasons
why customers haven't paid.
When you follow up with clients and ask them, 'Is there
a problem with the bill?' you may learn about customer
service issues, missed opportunities and additional sales. So,
be prepared for negative feedback and listen carefully
to what your customers have to say.
- Be polite, persistent and pleasant.
Making a call to the customer is a 'marketing opportunity'
as well as the opportunity to bring cash to the company.
Call a professional bill collector.
It's time to call a professional bill collector when you can't
get any response from a customer, or the customer repeatedly
fails to follow through on promised payments.
- Don't wait longer than 60 or 90 days, because the longer
the account goes unpaid, the lower the probability of
collecting.
- Bill collectors
generally charge on a contingency fee basis. The
fee is usually one-third of the amount actually collected.
In conclusion, it's
good business practice to monitor payments and follow up
promptly when payment is not received on time. Finding
out that a customer for whom you've just done a large project
has gone into bankruptcy is bad news.
We thank Rick Roberge, Collections Manager at the law firm
of Gulley & Associates in Walpole, MA for his insights. Rick
can be reached at 508-660-6900 or rroberge@gulleylaw.com.
Jean D. Sifleet
Attorney & CPA |
