Excuses, excuses, excuses.
QUESTION: I always have large amounts owed to me from clients. Is there anything I can do about this?
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— Rick Telberg
President / CEO
Absolutely! My feelings are that large A/R balances are your fault. Accounting fees are almost never material to a business’ cost structure, but letting fees pile up can make them somewhat material.
We need to recognize that we are businesspeople and part of that is to maintain cash flow. I also find that one of the worse things about accounting is collecting what was billed. This is a usual question I get and usually get it when the accountant is frustrated because they need to collect the money and get a lot of heartache speaking to clients about the payment.
Based on many conversations I had with CPAs (and my own conversations with clients), here is a listing of some of the reasons clients give for not paying.
- I misplaced the bill
- I did not understand the bill
- I thought I could pay it over time
- I did not think it would be so high
- I did not realize it was past due
- I never pay a bill until I am asked to pay it three times
- My bookkeeper should have paid it. Let me check with her
- Business is slow and my customers haven’t paid me
- I am waiting for a big check from a customer and when I get it, you will be the first person I’ll pay
- You made the bill out to the wrong company. As soon as you send me a correct bill, I’ll pay it
One of the things that truly upset me is when clients ignore the bill and wait until they are badgered for payment. I detest doing that and resent that I haven’t been promptly paid when I did the work promptly. I also get the feeling that if my call wasn’t made, I would never get paid. Who do these people think they are? They are stealing from me! And they resent my calls???!!! When you neglect to ask for payment after sending the bill, and let it lie, you are signaling that you either think the bill was too high and don’t really expect to get paid, or are indicating that you not a good businessperson. Either way, you will lose out.
I have a simple solution that has always worked for me. When I prepare my monthly bills and statements, I call anyone that did not pay the previous bill. I make the call myself – delegating this never seemed to work well for me. I tell the client that I noticed that the last bill wasn’t paid and ask if there is a problem with the bill. If there is a problem, I can address it right then and there. If there is no problem, I tell them I would appreciate it if they could put a check in the mail right now, or give me a credit card to charge the payment to. Doing this is uncomfortable for sure, but it brings in the money and after a couple of such calls the client gets the idea they need to pay the bills timely. My hobby is collecting stamps, not working for people without getting paid! This also limits my A/R build up and reduces the really uncomfortable calls when large balances are past due.
What do YOU think? How do you collect?