Getting Customers to Pay Faster: More Practical Tips
Steven Elias and Steve Capper – Flexible Funding - July 21, 2017
Mr. Elias and Mr. Capper are partners of Flexible Funding, a temporary and permanent placement funding firm based in California. They are also CATSS* Associate Members.
In our earlier article, we covered the primary ways to speed up your incoming cash, most importantly, casual calling. There are, however, many additional techniques and strategies. Unfortunately, even with timely and routine casual calling methods there may still be a customer who will cause you trouble, treating your invoice like it’s not their problem.
One mistake that some temporary agencies make is having their client contact or sales-person doing collections. If you don’t want to lose the client, separate the two duties. If a collection situation ever gets nasty, it is better to have the “good guy” doing sales and the so-called “bad guy” doing collections.
Good prior credit information is important. Independent temp agencies often think that business credit reports are beyond their reach, believing they are only sold in large blocks costing thousands of dollars. Many are not aware that they can get occasional credit reports at affordable prices by looking in the Yellow pages under “credit reporting agencies”. These report resellers offer national bureau credit reports, such as TRW, for $10 to $25 a report. Any account that will be over 3% of your total accounts receivable should merit a credit report.
In case you should receive a “Caution” on a credit report, have a good credit-denial form or letter to send out. This can help you land a good paying prospective customer that has a mediocre credit report inaccurately showing them as a slower pay. The letter informs the potential customer that you are interested in working with them but are unable to grant them credit at this time based on a TRW or D&B credit report. Be sure the letter includes the credit report file number and the address or fax number where they can request a (always) free copy of the report. If you check back with them after they have a copy of the credit report in their hands, they can often clear up information which is outdated, misinterpreted or completely wrong.
Even though a customer’s credit report may not meet your usual criteria, you can sometimes receive better terms than other vendors are reporting, just for the asking. Some large or medium-size companies will give ‘special’ or ‘better’ than usual terms based on the following. Explain to your customer’s Accounts Payable manager that you pay your employees the same day you send the invoice. Explain that you work with a payroll funding company or factor (if true), as does a large percentage of the temporary employment industry. Believe it or not, some large-size companies will help out smaller or independently owned businesses, in the spirit of cooperation and friendliness, by paying you sooner on a regular basis. Their accounts payable managers understand that financed money which is out longer drives up your costs.
One of our agency clients with extensive experience in collections suggests that we remind readers of the importance of not going “too far” in your collection efforts. If you’ve had payment problems with a customer and still want to do business with them, you must not forget to continue marketing to them. They may feel you would not entertain the thought of doing more business with them because of what occurred in the past. They may need you as much as you want them. Do not wait for them to come to you.
This agency also mentioned that the customers they’ve sued in the past have become good clients. They report “once you have sued a customer, the chances of the same customer taking you to the limit again are very slim.”
The older the bill the harder it will become to collect, so follow up on your receivables consistently. And keep it foremost in your mind that when you do, your customers will respect you rather than resent you.