Communication the Key to Assuring Prompt Payments
Entrepreneur’s Notebook
by Carol S. Frischer
Every business owner has to deal with habitually slow-paying customers. These aren’t necessarily deadbeat clients, but good customers who pay on their terms, not yours. They must be handled carefully, for while you need credit term compliance in order to run your business, you also can’t afford to lose them as customers.
Bureaucracies government agencies, universities and large corporations often have legitimate reasons for delaying payment. Often, information must be collected to authorize a payment before an accounts payable person can prepare a check. Sometimes this information comes from different departments within the organization, and can take time to gather.
When you are working with large companies it is important to keep in mind that they usually have the money to pay you and the accounts payable people have no reason to hold on to your invoice any longer than they have to. However, they must follow established procedures within their company. While there’s nothing you can do to alter the company’s payment process, there are actions you can take to expedite payment.
While working within the customer’s system, you can speed up their payment process by providing all the information they need at once, so you won’t have to wait for all the departments to send them what they need. Call the accounts payable person or controller and find out exactly what information they need in order to process your check. Write down their payment policy from start to finish. If you know a company requires original proof of delivery, make sure they get it. Keep a duplicate copy of the POD with your file copy of the corresponding invoice.
Blanket approach
If five people have to approve an invoice, send copies of the invoice to all five.If you know a company requires original proof of delivery, make sure they get it so the accountspayable person does not have to track it down.
Some business owners feel they don’t have the extra time to send invoices to five different departments, or follow up on proof of deliveries. However, if they calculated all the time and money they spend on delinquent accounts contacting the accounts payable person week after week, collecting missing information they would probably find it’s worth taking the time to expeditethat will result in expedited payments, especially when considering large receivables.
Write down the name of every person with whom you speak and ask them to spell it for you. Once employees know you have their name, they tend to pay more attention to your receivable because they know whatever promises are made can be traced back to them.
Another suggestion is to take the person in charge of paying to lunch and asking what you can do to speed the payment process. Keep in mind that very few people ask accounts payable people their opinion on anything, so they are usually flattered that you consider them important enough to seek their advice. The reality is their opinion is actually very important because they are in a position to tell you how to expedite payment.
Explain that your company has a new accounts receivable system in place and they are really coming down hard on you to get customers up to speed on paying invoices in a timely way. Put yourself in a position of enlisting their help, as opposed to just calling and asking them to start paying on time (which will not work).
Creating an alliance
When you put yourself in the underdog position and make a plea to the person preparing the checks, they will usually be more than happy to assist. At the same time, be sympathetic to their position and find out what you can do to help them get the checks processed quicker.
Once they have all the information they need to process the check, find out how long it will take to send. Approval of an invoice does not mean the check will be immediately forthcoming. The signature process can sometimes be as arduous as the approval process. Many times more than one signature is required.
If that is the case, get the names of the people who are signatories and keep them for future reference. If one of the signers is out of town, find out if there is someone else who may be authorized to sign your check. If it is an extremely large check, offer to send a messenger to pick it up. If the customer is out of town, offer to pay the charges if they will send it by Federal Express. This will create a sense of urgency that getting paid is important to you.
Once the check is in your hands, take the time to call the person(s) who assisted you and thank them. Better yet, write them a hand-written note or send an e-mail expressing your gratitude. These employees are taking calls all day long from creditors who want something from them. It is always nice to hear the words “thank you” and know that their efforts were appreciated.
Remember that you are one of thousands of vendors these people are paying. What makes payment of your invoices different than everyone else’s? In most cases, the answer is “you.” Take the time to work within their system and think in terms of how you can make their job easier. You will be amazed at the results.
Carol Frischer is a member of Holthouse Carlin & Van Trigt in Los Angeles and author of “Collections Made Easy.” She can be reached at [email protected].
Entrepreneur’s Notebook is a regular column contributed by EC2, The Annenberg Incubator Project, a center for multimedia and electronic communications at the University of Southern California. Contact James Klein at (213) 743-1759 with feedback and topic suggestions.
