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What would you get if you took all your overdue bills and laid them end to end? If you’re like many entrepreneurs, a paper trail as long as the Pacific Coast Highway and enough heartburn to put an Alka-Seltzer factory into overdrive. But it doesn’t have to be that way. By carefully deploying the guerrilla collections techniques the experts use, you can turn those invoices into a virtual geyser of cash for your business — starting today. And you don’t have to take steroids or start talking like the Godfather to get phenomenal results.
COLLECTIONS 1: A BACKGROUNDER
Before we plunge ahead, let’s just take a minute to be sure we’ve covered the basics. That’s essential in order to target the 100 percent success rate every entrepreneur should be aiming for. (If you’ve got this part down pat, feel free to skip ahead to Part 2, below.)
BE A SPORT. Your personal style has an impact on pay-up rates, according to the American Collectors Association, a trade group for collections agencies. The most effective collectors know how to determine quickly what motivates someone, how to communicate well, and how to work with people to get accounts paid. Cultivate a friendly, responsive attitude that makes customers actually want to pay you, and you’re on your way to success.
GET ORGANIZED. Sometimes all it takes to collect an overdue payment is asking for it. But you can’t ask if you can’t keep track. Your billing records and details of your invoice-related conversations with clients should be meticulously updated. If you’re currently mired in the many-scraps-of-paper method of organization, invest in some sanity-preserving software, like, right now! One good program is Goldmine 4.0, which tracks communications with customers and can be linked to accounting programs from Creative Software Enhancement, Peachtree, Algorithm Inc., and others.
DIAL. Now that you’re organized, make that call–before the bill is due. Start building a relationship with your clients by phoning every few weeks to assure yourself they’re satisfied with your products or services. Follow up promptly on any complaints. By the time the deadline arrives, you’ll be able to issue the friendly reminder as an afterthought.
TIGHTEN THE PURSE STRINGS. Take a good, hard look at your credit policy. Must you extend credit at all to remain competitive? Start thinking about demanding more payments up front, says Cynthia Brower, a manager at the National Association of Home Based Businesses (NAHBB) in Owings Mills, Md. “If you give somebody even one week to pay, you are extending credit Most small and home-based businesses can’t afford that,” she adds Phase in the no-credit policy gradually with each new customer and with those who’ve abused your credit in the past, to avoid alienating existing clients, suggests NAHBB president Rudy Lewis.
Got all the basics covered? Good. Now let’s move on to…
COLLECTIONS 2: THE MASTER CLASS
CALL FOR BACKUP. Assuming you have to issue credit, you obviously don’t want to dish it out to every Debtors Anonymous dropout who shows up on your doorstep. So, have all clients fill out a credit application. Then, actually call their references for an honest appraisal of their payment habits, advises Kelsea Eckert, a collections attorney based in Jacksonville, Fla., and the author of Getting Paid in Full (Sourcebooks Publishing, 1994).
As a side benefit, credit applications give you a discreet way of finding out the name of each clients bank. If you have to obtain a court judgment to collect a payment in the future, you’ll be able to make a beeline to the bank account you’re going to attach instead of wasting time and lawyers’ fees trying to locate it.
PRINT WITH A PRO. Many entrepreneurs let their inner cheapskate take over when it comes to invoices, whipping them out on a PC. Squelch the urge. “Your image should be equal to or greater than your price tag,” Brower says. “If you look as if you really don’t care about getting paid, they won’t care about paying you.” The lesson: Have your invoices printed up professionally when you order your stationery and business cards.
COLOR BY NUMBERS. Highlight the “balance due” section of your invoices in color. That can speed up accounts-receivable performance by 30 percent, according to a study by Xerox Corp. Use a color copier or a laser printer if you have one, says Linda Stern, the author of Money-Smart Secrets for the Self-Employed. Otherwise, use a yellow highlighter.
CUT ‘EM A BREAK. It’s easy to train your clients to pay you on time if you give them a cash incentive — or a disincentive against being late. Offer a price break if they mail their check by an early deadline, suggests mortgage broker John Svirsky. As an alternative, charge monthly interest or a late fee on overdue bills. (To bypass the sticky banking regulations that come with charging interest opt for a flat “rebilling fee” of $10 or $15 a month, Stern advises.)
KEEP IT SHORT AND SWEET. Spending hours haggling with clients over the fine points of your bills? Rather than itemize each detail of the service you’ve provided, bill them for something general, like “accounting services,” Stern recommends. This will discourage nit-picking. (Of course, you’ll have the breakdown available if it’s called for.)
DON’T DELEGATE. It may be tempting to foist off on a staffer the unpleasant task of making collection calls. Resist that temptation if you want your money, says Elizabeth Mallory, owner of Heritage Financial Recovery Services, a collections agency in Upper Saddle River, N.J.: “The higher the person the phone call comes from, the greater the chance of collectibility.”
… BUT IF YOU DO, MAKE IT WORTH THEIR WHILE. Motivate any staffer who does help you with bill collecting by offering a set percentage of each invoice that gets paid. Bouchard attributes her nearly 100 percent collections rate, in part, to a similar deal she worked out for herself as administrative director of Travmar Destination Directories, a publishing house in Providence, R.I.
DROP ‘EM A CARD. If clients understand why your business needs their money, they may be more willing to pay quickly. Elizabeth Ann Lander, owner of Mail In Motion, a mailing house, describes how she once called a client to explain that her outstanding invoice was keeping Mail In Motion’s accountant from closing out its books for the quarter. The check arrived promptly.
GET RHYTHM. If some of your late-paying clients work on a seasonal basis, concentrate your collections efforts at those times, says Mark Loetscher. He seldom sees a bill go uncollected at his Unishippers franchise, which handles sales and marketing for companies like Airborne Express out of Fort Lee, N.J.: “Work with that cyclical cash flow.”
MAKE A TRADE. When trying to secure a payment from a small business that’s in a money crunch, consider a barter agreement as a last resort, Brower suggests: “You may be able to exchange services and come up with a more positive arrangement” But discuss the tax implications with your accountant first, Eckert says.
CUT YOUR LOSSES. If a bill goes unpaid longer than four months, your chances of collecting it diminish greatly, Mallory notes. Offer those in dire business straits a discount on their bill if they’ll pay you a reduced lump sum up front, says Denise Manniello, vice president of JDR Recovery Corp., a collections agency in Ramsey, N.J. You’ll be able to put that money back into your business immediately without investing any more time and money in collections.
GIVE ‘EM A HAND. Svirsky asks down-and-out clients if there’s any way he can assist them in earning more money. He’s willing to help a debtor find work, connections, a financial planner, or an accountant. “If I can help, everyone wins,” he says. Recently Svirsky helped a client secure a second mortgage on a house to temporarily cover a $7,000 debt. “If the client had paid me the $7,000, he couldn’t have put that money back into his business. This way, his money can make money for him, and he’ll pay me in six months.” But Svirsky admits he’s no saint: “He’s paying interest — 12 percent.” (In a pinch, you can also refer someone to Debtors Anonymous, at 212-642-8220, which has a special program for business owners.)
WHEN ALL ELSE FAILS, OUTSOURCE. If those 120-day-old bills are taking valuable time away from your business, don’t feel guilty about sending them to a collections agency You may be able to defray the cost by negotiating a volume discount. You can also try resolving stubborn problems in small-claims court, Eckert points out. You don’t need a lawyer, just good records.
Consider reporting anyone who has written bad checks intentionally to your state attorney general’s office. Since this is a crime, you may wind up with some free legal help.
A FINAL NOTE. Many people think of bill collecting as a hostile process. But, as veteran collections agents know, you’re actually doing your delinquent clients a favor by forcing them to get their lives in order. “I have received thank-you letters from people for helping them,” says Mallory.
Mind over Money
Mortgage broker John Svirsky used to have trouble getting his clients to pay up — until he saw the light. Rather than pester clients for money or sue them, Svirsky “thinks his money home.” First he gets into a calm, meditative state. Then he visualizes debtors writing out a check and thanking him for a job well done. “I send them blessings, wish them prosperity, and hope their business thrives,” says Svirsky. “This is a New Age technique that may sound foolish, but it works amazingly well.”
Since he began implementing this technique 15 years ago, Svirsky has seen less than $10,000 go uncollected. One client spontaneously took out his fountain pen and wrote him a check for $32,000 “with great flourish,” says Svirsky. “He said to me, “You earned every penny of this. Thanks for the good work.’”
Written by Elaine Pofeldt for Success Magazine
Source: FindArticles.com

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