accounts recievable

[GOINGBROKE]

Whats the best method used for collecting?
Run a small repair business $60-70,000 a month in sales. Mostly local work which I think makes it worse. When you go to the neighbors to pickup your equipment seems like the checkbook is always left at home.
Started this business from scratch 5 years ago, not having a clue what to do on the business side, now can see what should have been different.
Now have plenty of work and a good rep, trying to figure out what cash flow is.
What is the best method to get these people to pay when they pick up there equipment without making to many waves?
looking for some pointers
thanks

 

[AtlasRob]

What is the best method to get these people to pay when they pick up there equipment without making to many waves?

You have the reputation that brings you work.
Now is the time to start dictating on what terms that work is done, be it account, cash, in kind, etc etc.

If you have account customers make them aware of your terms, you are not a charity. If they bring you regular work you may be happy to give 5, 10, 30 days credit but make them aware of the terms. Then send a statement showing whats due within a few days as a reminder. A few days after that if money is not forth coming, pick up the phone and gently remind them that if they havent popped it in the post, would they be kind enough to do so as it would be greatly appreciated.
Persons dropping stuff in for repair / maintenance, need to be aware that payment in FULL is required upon collection due to the fact that a few people ( NOT THEM ) have dumped on you and things being tight you have to treat everybody the same.
I am sure if you are clear about the way you operate and expect to be paid you will find most people amicable. Give the average person an inch they naturally take a foot, some stretch it beyond a joke.
The biggest mistake most of us make is lack of communication, dont assume, make it clear. :drinkup

 

[darinray]

I must be a freaking flea turd because "small business" making $60K-$70K a month would be GREAT. I keep saying this to myself but man I'm in the wrong business.

 

[GOINGBROKE]

I wish that was making $60-70. Thats sales! Sometimes think it takes $100,000 to get that done

 

[AusDave]

Stop going broke!

Whats the best method used for collecting?
Run a small repair business $60-70,000 a month in sales. Mostly local work which I think makes it worse. When you go to the neighbors to pickup your equipment seems like the checkbook is always left at home.
Started this business from scratch 5 years ago, not having a clue what to do on the business side, now can see what should have been different.
Now have plenty of work and a good rep, trying to figure out what cash flow is.
What is the best method to get these people to pay when they pick up there equipment without making to many waves?
looking for some pointers
thanks

Hi GOINGBROKE.

First thing I would so is change your HEF name from GOINGBROKE to something more successful. It's amazing how negative statements and thoughts can affect your business.

One of my businesses involves IT sales as well as services. The margin on some of my computer sales in under 10 percent, I don't think any small business goes much lower than this. Accordingly my billing for most of them is COD. Same with services which include onsite calls. I have a very good relationship with my clients, many are good friends, but I find nothing gets in the way of a good friendship more than unpaid debts.

I try to under promise and over deliver on the sales and work I do and my customers appreciate it and have no qualms paying. I try to make sure I offer more than any competition I may have, so my clients keep returning. If my clients don't want to feel the financial impact immediately I am happy to take Visa & MasterCard for which I have a very good merchant services percentage rate (less than 1 percent). This can overcome the chequebook left at home syndrome as people usually carry credit cards for fuel purchases and other purchases on a day to day basis. You can even get permission from the client to hold the card details to expedite payments in future especially if they send someone else to pick up. You can also ring them for their card details as well. If you are not using your credit card facilities thoroughly you can miss out on quite a lot of quick payment opportunities.

I have a few large clients whom I trust and do a fair bit of work for over a month. With these clients I often build up an invoice over time then submit it at my convenience, still marked COD. They always pay promptly.

I have had a few clients over time I had had to chase up. Firstly I repost the invoice and a statement to them and give them a week. If still no action a polite phone call asking them if they have overlooked the payment. My partner usually does this as she does the accounts, but also a women requesting payment from a man seems to be a more productive strategy. There is also less likelihood for her to have the emotional involvement with the client you may have, which makes it less comfortable to talk about these matters. My parter is a very important part of my business. I can't do the work and all the accounts as well. If you don't have one of these you need one or pay a good office person to do this work.

We have virtually always been paid and if necessary we will take payments in regular installments if the client is having a hard time. But the payments must be paid absolutely as agreed and on time. We are not a bank!

You may lose some clients at first as you explain to them you can't stay viable the way things are going and must have prompt payment. If you have been generous to them you may find that you have been used a bit and these people are paying everyone else before you You must believe that you are worth paying first and considering the work you do you are probably one of your clients most important contacts. If they are decent people they'll stay with you or come back later on your terms after they've sent your competition broke!

I hope this has been helpful. I've run my own businesses in a wide range of fields over the last almost 30 years and what I've said works for me. Mind you I couldn't work for wages for anyone else any more, I'd be a crap employee

Hope you will be more successful, Dave

 

[John C.]

To do that much repair business in one month is a fair sized repair business requiring employees, facilities, capital investments in tools and supplies. I doubt you got into the business totally blind to the realities of being in business.

The economy has been good for too many years and everyone has gotten used to using "FREE MONEY". That term refers to using someone else's money to augment their own cash flow without paying for the use of it. In business terms that comes down to getting their machine repaired and then paying you at some point in the future. You fixed the machine and the money belongs to your business. You let the machine owner have their machine back without paying you and now you also have lost the use of your money until your customer decides they want to pay you. They could be the nicest people in the world but in effect they are stealing money from your business.

I learned this the hard way. Get a service work order from a car or equipment dealership somewhere and read it word for word. Next, get on to a computer and write out a work order that you have the customer sign before they leave your business when dropping off the equipment. Use the language in those forms for a basis in your form. Make your terms absolutely clear up front. If they are to pay upon pick up, then you can remind them of the form they signed requires they go home and get the forgotten check book. They will make lots of noise about how you are showing no respect in trusting them for the money. I usually make a point by showing them a dollar bill. It says "In God We Trust", I add that a credit application needs to be filled out and terms agreed too before I let the machine leave my possession.

Good Luck!

 

[Speedpup]

When people in business owe you money and need more services they will likely go some where else when they haven't paid their bill with you. Be clear with them and tell them you love their business and will jump through hoops for them and give good prices but you need to be paid as agreed.

I worked for a GC and made 30-40% on each masonry job with him. It was not worth the aggravation of calling him for 4-5+ months to get paid. It probably was worth it mathematically but to me I need paid in 30-60 day range. His office called for more work and I told them I need paid in 30 days or I was not interested becaused of past experience. I usually make 17-20% on a job. I was still happy I told him that.


Also put they are responsible for collection fees on your contract.