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Fitting the Pieces Together: A Guide to Office Operations for the Liquid Waste, Portable Toilet & Septic Pumping Industries |
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Collecting outstanding moneys is always a difficult and time-consuming job. You are supplying, or have supplied, a service and the customer has not paid for the work done. The underlying question is why the invoices have not been paid. There are different types of customers with different reasons why they have not paid the invoice/statement. The idea is to build regular activities into your business practices so that you pick up the non-payers as soon as possible to minimize the amount of your money on the street.
Two points before we look at the different types of non-paying customers.
Never take non-payment as a personal affront
Never get angry
If you take non-payment as a personal issue, you will miss the opportunity to reach some sort of agreement so you can maintain your customer and still get your money. You will be looking for an apology rather than payment. It is hard to put apologies in the bank to make payroll.
The second is never, never, never get angry. Once you get angry, non-payment is no longer the issue, the only issue is anger. Customers will try to yell and scream so you will lose it and then they can hang up the phone and not pay the bill. If a customer starts down this path, do not follow. Repeat your request for a reasonable and balanced payment of the outstanding moneys and try to keep you voice balanced.
Let’s take a look at the various types of non-paying customers.
Will Pay When Reminded
The first class of customers will pay the invoices, but they have their own operational rules to paying invoices. Some of their guidelines are:
They only pay bills that have late penalties;
They have limited cash flow so they pay invoices for vendors who complain;
Sickness or other personal issue took invoice payer out, i.e., too busy to write the check.
So the best way to handle this type of customers is to catch them early so you get your money in a timely fashion. Some guidelines you may want to consider are:
Always charge late penalties for moneys over 30 days late. You are not interested in the late charges. You are interested in getting the invoice paid. Typically, charges are 18% per year with a minimum of $5.00 per month. In the beginning, you may have to credit he late charges for customers who start paying, but in the long run you are training your customers to pay the invoice within the statement terms, i.e., net in 10 days.
Call all customers with moneys over 60 days late and document when and how payments will be received. It is a good idea to write down the agreement and send a written copy to whoever you have the agreement with.
Many times it is necessary to remind the customer to pay the invoice. If you can, have the agreement printed on all invoices and statements for the customer along with the name and phone number of the person that you spoke with. In this way, a person in the customer’s office can take responsibility for paying your company’s invoice. Name identification goes a long way towards getting a bill paid.
Will Pay Only With Loss of Service
This customer will only pay when they have been threatened with loss or potential loss of service. This is the contractor who has not paid for three months and will continue not to pay until you:
Threaten to pickup the unit(s)
Physically pickup the unit(s)
Call a collection agency
Start small claims court action
Call his/her bank and tell them the contractor is not paying his bills
Call local inspector and tell then a unit is no longer on the site
Once he realizes you mean business, he pays the invoice and more then likely will repeat the cycle over again. You may want to consider not taking on this customer on future sites. On the other hand, he will eventually pay and if you understand that collections will always be an issue with this type of customer and they are a revenue source for your company, then you may want to continue the business relationship.
Will Never Pay
There is a third type of customer. This individual usually comes in two flavors. The first is the business that is on the way out and does not have the resources to pay their bills and will not have the money. The second is the individual who thinks it is good business to get service and not pay for it. The question is how to minimize your losses. This means you have to quickly identify that service needs to be cut off and minimize your company resources tied up in trying to get money from a customer who will never pay.
The best way is to set up company procedures to set up barriers to keep this type of customer away. Some simple practices you may want to consider are:
New customers should be billed in advance.
Have at least 1-month minimum for all new customers and, if in doubt, try two months.
All new customers, i.e., less then 6 months of service, should be flagged and if in arears in payments, serious consideration should be given to pulling the units.
Collecting receivables tends to be the last job on the list. It is stressful, aggravating and time consuming. You have worked hard to provide a good service and deserve to be paid. It is very easy to take collections personally and let anger into the situation. If you can avoid getting mad, you can institute good business practices to minimize your losses due to non-payers and still enjoy doing business.