Collect Your Money
After careful thought, research, and consideration, you have started your new business. You have onboarded good employees and begun finding and servicing solid customers. That is a great start. However, you are facing many obstacles and challenges to keep your business viable.
Some of the best advice I received shortly after starting my first business over fifty years ago was: collect your money.
I was attempting to rent warehouse space in San Rafael, California, to start E & S Enterprises, Inc., the manufacturer of Felicity Glycerin Soap. The building owner, Sam Knoles, a very experienced and successful businessperson, not only became our landlord but also an excellent mentor. He shared how he had succeeded in business for over seventy-five years as a business owner. Yes, seventy-five years! Sam was ninety-five years old and still going strong when we met.
He stopped by our office at the beginning of each month to pick up the rent check, and we would talk for a few minutes. Early on, I asked him, “If you could only give a young businessperson ONE piece of advice, what would that be?”
Without hesitation, his reply was: “COLLECT YOUR MONEY!”
I took his advice, implemented procedures to make that happen, and carefully monitored receivables throughout my over fifty years of owning businesses.
What procedures did I put in place?
Run a credit check – If the potential customer is unknown, take the time and effort to assess their creditworthiness. Don’t extend credit to customers who do not have decent credit.
Request an upfront deposit – With new customers, always try to collect a deposit. If you don’t ask, the answer is no.
Bill immediately – Send the invoice as soon as the job is completed.
Follow up within three days – After sending the invoice, follow up with the customer and ask three critical questions:
Did you receive the invoice?
Is the invoice correct?
Is it set up for payment?
This reduces the chance of hearing excuses like “I never received the invoice” or “The invoice was incorrect.”
Step up collection efforts – If an invoice becomes past due, address it promptly. Solve any issues and, if payment is still not received by fifty days past due, notify the customer that they will be sent to collections if the payment is not received within the next ten days.
Send to collections – If the payment is still not collected, escalate to a collection agency and put the customer on COD (Cash on Delivery).
By following these steps, you can protect your business, maintain cash flow, and avoid unnecessary financial struggles.
Keep reading our blog, or if you want to Wright Your Business immediately, book a 15-minute Google-Meet meeting to explore the possibilities.
