One of the biggest challenges businesses face, is that management spend a huge amount of time trying to collect payments, rather than running their business. I hear the complaint often from my clients. “Why do I have to spend my time chasing payments?”
Sound familiar? Well, I think I have a few insights:
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1. The person or company we sold to is not our customer! Now, I’m not as crazy as this comment sounds. Many people who we do a sale to are just buyers, who need a once off supply of a widget, and any supplier will do. Because there is no relationship between ourselves and the client, there is no pressure on the client to feel any loyalty. No loyalty = no responsibility = no payment.
2. We didn’t perform as required or expected! Many suppliers make promises on delivery or quality that they are unable to fulfil. The client is disappointed and therefore uses the only weapon they have to vent their frustration – withholding payment.
3. We didn’t clear the terms of payment upfront! Many of the salespeople I interact with daily are so eager to get an order, that they forget the basics of business. Turnover is vanity, Profit is sanity, and Cash is reality. In other words, it’s not a deal until you’ve been paid. If you don’t handle the terms with the client as part of the deal, you often have different expectations from your client. You expect a COD payment; he assumes he has 30 days to pay.
4. Your client can’t collect his debtors! The problems that you face with collecting cash are not unique. Often your customer has the same problem. If you have done business over time with your client and know him to be a good payer, discuss the issue with him before getting uptight. If you give him a bit of breathing space, he could well become your customer for life once his cash flow improves.
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5. Your customer never intended to pay! There are lots of fraudsters looking to take advantage of companies who are desperate to make a sale. How often have you had a “funny feeling” about a customer, but did the deal anyway. I’ve come to realise that some of the best deals I’ve ever done, are those that I didn’t do. Don’t be naïve. If you don’t feel comfortable, don’t take the order.
If you’ve found this email interesting give me a shout. I’d love some feedback.