To begin this blog, let’s just say that Accounts Receivable is not the sexiest of business topics. Who owes the company money and how can we collect in a timely fashion makes any business owner/entrepreneur ponder the thought “Why did I go into business for myself?” Collection calls, collection letters and small claims court can all be avoided with a few simple premises.
The first premise is that customer terms for a new prospect need to be spelled out up front. Why not confirm on your first phone call, correspondence or engagement letter “Payment is due at the time of service.” and avoid putting yourself at risk.
The second premise is that new customers need to give you their credit information, have a credit card on file or a prepayment system. Larger companies may balk, but I find small to midsized companies welcome the ease of using their card to take care of outstanding invoices. QuickBooks has its own merchant account used for receiving payments. Using the same secured technology as TurboTax, QuickBooks encrypts the credit card information within the program and seamlessly allows the business to charge the customer and send out a “Paid” invoices for a receipt.
The last premise is customer retainers or deposits are a part of doing business. Your services are being sought out by a customer. They look to you for expertise and guidance in solving their problem. You set the stage for how you operate. That may mean the first meeting is free, but the engagement letter and payment authorization must be signed before you move forward. Be sure to carefully track your customer deposit as a company liability: you owe someone services and you must track what is the liability per customer.
Without knowing the customer’s payment history, use a service such as Dun and Bradstreet. Their credit service will expose you to the risk factor when dealing with this customer. Do the legwork up front and reduce your time chasing money down in the end!
