As my mantra goes, ‘family is a team sport’. Call me crazy, but my home…
Your Policy on Accounts Says A Lot About Your Business
If you were standing in line at the local grocery store and a complete stranger walked up and asked for you to pay for their grocery items, because they didn’t have any money on them, would you reach into your own wallet and hand them your hard-earned cash, and then trust they’ll pay you back next month when they have money?
I may be going out on a limb here, but I’m pretty confident most people would say no. But if that’s true, why do so many Small Business owners offer complete strangers accounts? It’s not too much different.
My Account Policy
In my business, I have adopted the same account policy as Woolworths; I don’t give people accounts, and I make no apologies for this firm stance. I’ve had a no account policy my whole career and after more than twenty-five years of being in business for myself I have…wait for it…zero outstanding accounts. So I think I’m doing something right.
What’s more important is my other team members can get on doing what they’re employed to do, helping me run my business and looking after our patients, not chasing outstanding accounts.
Some People Don’t Pay
Why do you think big companies like Woolworths don’t give accounts to the average person in the street…it’s because they know some people will not pay their bills and they also don’t want to have to employ a whole department of people to chase them?
I work hard and I want to be paid…it’s that simple. And if you want to protect your future, you need to value your services, charge accordingly and expect prompt payment as well.
Writing On The Wall
It’s sad when you read about a Small Business going broke, only to find out the business went broke because one or two large accounts were not paid…and what makes it worse is the warning signs were there well beforehand, but they chose to ignored the writing on the wall.
If someone owes you money, and they have gone past your normal payment terms, meaning they are now an overdue account, why on earth would you continue to offer them further credit and continue to do work for them? You have to draw the line at some point.
It’s Starts With Change Your Thinking
I understand that every industry is different and sometimes accounts cannot be avoided, but they can be controlled.
If you give people an invoice with 30, 60 and 90-days written at the bottom, you’re basically telling them they have up to 90-days to pay their account.
Even though that’s not what you mean, they know they have until 90-days before it becomes an overdue account, because that’s what the invoice says, and that’s how you’ve taught them to behave.
But are you using 30, 60 and 90-day invoices because everyone in your industry does this? If so, maybe it’s time to change your thinking. If you must give an account why not change it to 7, 14, 21-days…then overdue, thereby getting you money faster.
Your good clients
Every business has good clients, the ones that always pay their bills on time, without someone in your business having to chase them. These are the type of clients you want to build your business around, not the late payers.
If the trust and respect is mutual between you and your good clients, you should be able to adjust your credit and invoicing terms to 7, 14 and 21-days without there being any backlash whatsoever…because they trust and respect you.
How much better would your monthly cash flow be if your business was being paid within 21-days instead of 90+ days? You’ve done the work…you should be paid.
Your account policy says a lot about you and your business. If you honestly feel your business provides an outstanding service, much better than your competition, then you should insist on being paid promptly, not in 90-days later like your competitors. You deserve better, and I bet your good clients will agree.
“The opinions expressed by Smallville Contributors are their own, not those of www.smallville.com.au"
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