| Question: What has been your experience collecting money from friends or family that you loaned money to? Did they: a) Pay you on time as promised? b) Pay you but only after you chased them up? c) Never paid you. It’s been years and you are still waiting to be paid back… We all wish that everyone we loaned money to fell under category A above, but sadly that isn’t the case. I for sure have had experience with all the above three and as businesses are run by people, you will certainly come across the same characters when it comes to collecting money that is due to your business. Would it surprise you if I said that sometimes WE are at fault? Yes, this is true. We can sometimes be the enablers who are NOT making it easy for the customer to pay by making the following common mistakes:- 1) Not invoicing the customer. An invoice is a document that ensures that you and your customer are on the same page. It is a reminder to a customer that they have a payment that is due. Even friends and family need to be invoiced because they can’t pay you of they do not know how much they owe you. It is your duty to tell them, so be sure to invoice. 2) Not having clearly defined payment terms. What are your payment terms? Do you want to be paid 100% on delivery? 100% upfront even before you start the work? 50% upfront and the rest on delivery? etc. Tell your customer how long they have to pay you, otherwise they will assume that they don’t have a deadline. 3) Not chasing the payment This is mainly driven by the fear of being the ‘annoying’ business person. Sometimes life happens and unfortunately your business is not a priority to others. So a reminder – (sometimes several reminders) – will work in your favour because the customer might have simply forgotten. Or maybe they thought that since you have not asked for the money, you do not need it. 4) Keep serving a client who has not paid. If they have not paid a small bill, what guarantee do you have that they will pay a bigger bill? If you keep serving them you are literally working for them for free. Is this what you want? If we can make sure that we are not making these mistakes, then we know we are doing what we can to get paid. The key to all the above is to keep the communication channels with your customer open. Sometimes they may just need more time to pay, but you won’t know if you don’t communicate with them. Unfortunately, you will come across customers who fall under category C above. They just won’t pay. Aside from taking legal action, you might find that the best thing for your sanity and peace of mind, is to never do business with them again. They probably have issues which have nothing to do with you. Learn from this painful experience and focus on making more money serving the customers who will actually pay you. Join the ‘Simple Finance for Small Businesses’ community. |
Customers not paying on time? Is it YOU or is it THEM?
