As a vendor in this economy, you are likely facing some difficult times. Staff lay offs, budget cuts, account losses and inflation have left you scratching and scraping to stay afloat. The once steady revenue stream from your client base has suddenly turned into a trickle. Accounts aren’t getting paid on time and you can’t meet your overhead. So, what are you going to do?
Well, it is important to remember that losing one of your accounts isn’t good for you or your client. They don’t want to drop the account any more than you want to see it go, but you’re going to have to stand out among a long list of vendors as someone they want to keep doing business with. While none of us can solve the problems created by a recession, there are some basic guidelines you can follow to maximize collections and retain current accounts.
If you have a hard time getting payments by their due dates, it may be time to revamp your invoicing and collections policies. Here are five ways to work out the kinks:
Send invoices immediately and regularly
When you are owed on an account, now matter how small the amount, send the invoice immediately. If it is a recurring monthly fee, send the invoice at the same time each month. This lets your client know that you expect the payment immediately and that it is important to you.
Sending invoices irregularly sends the message that you are not diligent or serious about collecting payments. How could you expect them to be serious or diligent about paying you? Other vendors with good, consistent invoicing practices will have their invoices pushed to the top of the stack. Meanwhile, tight funds leave your account hanging.
Update your records; invoices need to reach the correct person at the correct location
With all the downsizing going on, you will want to verify that your invoices are still going to the right person and the right building. Many businesses are shifting offices and responsibilities among personnel as staff is laid off. Have someone call your client list and update your records with the current address, phone, fax and email. During this process, be sure to ask who the billing contact is and get their contact information as well. Your invoices need to be addressed properly to prevent trailing payments from invoices lost in the mail and to protect your collections person from getting the run around.
Make consistent collection attempts; increase the attempts if the account remains unpaid
You don’t have to be a pushy to be persistent. Create a collections policy and follow through with it. For example, if you decide that the collections process will begin three days after the account is due, the receivables manager should hear from your office on that day – every time. If your policy is to attempt weekly, and an account remains unpaid, you may want to begin calling twice a week, three times a week, or daily depending on the longevity of the outstanding amount.
Be courteous and respectful when attempting a collection
When the money isn’t there, someone isn’t getting paid. You are more likely to be on the “accounts to pay” list if your conversations are amiable and frequent. Ask them what would be a reasonable commitment. Sometimes it will mean getting a partial payment or waiving a late fee. Set a date for follow up if the payment hasn’t been received, and follow up on that day. Record who you spoke with, the date and time, and what the outcome of the call was so you can accurately reference the conversation in your follow-up.
Here is how a follow-up call might begin:
“Hi So-and-So. This is me from My Company. I spoke with you on the 4th about invoice number #, and you said that you could send the payment on the following day. We haven’t received the payment yet, and I wanted to make sure you were able to do that after all.”
If So-and-So didn’t get the invoice out as promised, ask for a new commitment and follow up accordingly. It may take some time, but you will see results as your calls become expected.
A word for the wise: be careful not to make accusations or appear frustrated; it will only hurt your attempt and emotionally justify a reason not to cooperate. With the shifting of responsibilities around struggling offices, you will do well do keep in mind that the person you are talking to may be doing two jobs now. Try to be helpful and you may find your good attitude become the obligatory factor.
Offer incentives or a new payment schedule
If you are having trouble collecting a past due account, try offering to waive late fees for an over-the-phone credit card payment or splitting the invoice into two payments. You may also need to change the payment schedule. If your client’s receive their funds in the last week of the month, then you may want to attempt your collection in the first week of the month while they still have money in their account. Try asking if there is a better time of the month to invoice.
Not only do you need to receive your payments on time, you also need to keep your existing client base happy. With little new business coming in, these are the folks that are going to get you through the tough times. Here are some tried and true ways to nurture those accounts:
Address any problems immediately
Mistakes will happen, expectations will be unmet, and communications will fail. It is just a part of business. Expecting your clients to understand and sympathize with that is another story. Don’t ever brush off a mistake or a miscommunication, no matter how small. Every time you do, a mental marker goes down in that person?s brain, and those tallies will eventually compound into poor feelings about your business and service.
Address each issue as soon as it arises, and do not make the mistake of letting them bring it up first. Be proactive and positive. Admit the mistake or shortcoming, and give a sincere and detailed apology in which you acknowledge how they are or may be feeling. Offer compensation or a further commitment, if necessary, and ask them if they there is something more you could do to rectify the situation. In doing this, you will alleviate and prevent the offended party from creating an uncomfortable or hostile confrontation and bring immediate closure to the conflict.
Form a personal relationship
Marketers, advertisers, and branding agents understand that business and purchase decisions are not based solely in logic. I remember reading a snippet about ValueClick in B2B magazine this past spring. For their 10th anniversary, they hand delivered cupcakes from local bakeries to key account contacts across the country. The venture cost them less than $800 and paid off a whopping $170,000.
The moral here is a little deeper than “everybody likes cake.” ValueClick did something personal and memorable to thank their best clients, and it paid off big – it invoked a warm and fuzzy feeling that was later an inexplicable factor in the decision making process. Gift baskets, birthday cards and hand written thank you notes go a long way. Forming a personal relationship will earn you personal consideration, which is a lot more valuable than being a negative dollar.
Give generously, and I mean something more valuable than money
Tim Sanders, author and former pioneer at Yahoo!, wrote a bestseller on this topic called Love is the Killer App. In the book, he describes a business approach that shatters the hostile greed fills need model of the 1980’s. He calls it the “love cat way.”
Basically, it is all about sharing your resources, and I don’t mean money. It is about sharing your knowledge and your network. How do you apply this philosophy? It won’t be difficult with a little consideration. Everything you’ve learned and everyone you know is relevant to someone’s business.
Work on getting referrals and resources for your clients, even when it won’t directly impact their account with you. Set goals to help your clients grow their businesses, and be diligent about meeting them. When they see you making a real effort to bring them more revenue, they may make an effort to do the same for you. And at the very least, they won’t be eager to get rid you.
Don’t even think that follow up thank you email is doing the trick. That is just due diligence, and honestly, I usually don’t even read them all the way through. To really show your appreciation, you are going to have to make a more personal effort. Do something unexpected. A well done, animated e-card is a lovely send sure to brighten any drab, old in box, and a handwritten card is even better. Get creative!