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Collect From Slow Pays

The best way to collect money from slow pays is to never let them owe you money in the first place. Collect half on deposit and the other half on delivery. That's the very best way to maintain a good cash flow and know you'll get your money.

Even COD is less effective: Many a printer has shirts on hand that well-intentioned (or not) customers ordered, then didn't get that grant money they were expecting, discovered the fraternity didn't officially allocate funds for the order, or any one of a thousand other unexpected circumstances. Then July 4th comes and goes and you're left with a box of rags.

You can trust me, really!
Alright, so maybe you can't follow this procedure with every customer. But if yours is a small company you probably can get away without offering credit. Oh, so the guy from Harvard says his university can't pay COD? Well, consider that if he expects you to trust him, then he can trust you too by submitting the bill to his accounts-payable people as finished when he places the order. And he can also give you his personal credit card...because you're only going to use it if they don't pay...and he just promised you that they're good for what's the problem? Someone can't pay you untill Tuesday for that hamburger you printed on their shirts today? Well, they might as well give you a check today that you'll hold untill Tuesday. You have more legal standing with a check than with a receipt. Bad-check writing - called "paper hanging" in certain circles - can, at least theoretically, land someone in jail. If you have to give credit, make certain they completely fill out a credit application and have them sign a personal guarantee. Don't have a credit app? Start with one you had to fill out for somebody else, modify it to fit your business, and voila! - you now have a credit app. Your bank or mega-vendor paid money for legal help that you wouldn't dream of spending to create such a form. (Actually I have a sneaking suspicion that, about 80 years ago, someone went to the trouble to write one up and everyone since than has borrowed it.)

A dunning hierarchy
Okay, somebody owes you money and is late paying. Let us again go back a step. I know one printer - and not a little guy, either - whose accounts-receivable practices are abysmal! He'll let weeks and even months go by before sending out an invoice. No wonder he suffers cash-flow problems. Prompt billing is one of the best ways to get paid promptly. No, it isn't right but, for some reason, there's a certain kind of customer who can justify paying late if the bill is late.

After you bill on time and they haven't paid on time, send a polite late notice. If that doesn't work, then call the customer's billing office - you already got this info, in addition to the customer contact, when you took the order. When they don't return your calls, then call your customer contact and make sure he or she signed off on that bill. And if you don't get the money but you do get real people on the phone, ask them for specific payment information. Don't take, "I'll try to get something out next week." Ask for a specific amount and a specific date; even if it's ony a partial payment it gets things moving in your favor. For arcane psychological reasons, folks who haven't paid you anything for a long time are harder to collect from than those who've made some payment. It's symbolic, a sort of bond, an investment if you will, that greases the skids for additional payments. When you get neither money nor cooperation, you'll have to take the customer to small-claims court. Don't make idle threats about this. Learn the details of how it works and do it. You'll be surprised at how easy it is and at how effective simply recieving the notice in the mail can be toward getting your money.

Additional strategies
If someone sends you an unsigned check in order to delay payment (or even if they honestly meant to sign it but forgot) then write "lack of signature guaranteed" on the signature line, endorse it on the back and make the deposit (or, better still, cash the check). If they have funds - surprise - you get 'em.

When you hear, "We only cut checks on the third Monday following a full moon, and only when two excecutive jackasses are in the office at the same time...." I sympathize with the anger you feel, and I share it. But, unless you have a finished order to go out and can reply, "We don't ship on Fridays unless we are paid a check that is backed by customer's bank account...." you probably can't do much other than finding out in advance, and deciding whether you still want to take the order.

Actually securing a new order from the design or customer-service department of a slow-paying company can help you collect on an older debt. Once the project gets to the point where it's too late for them to go elsewhere, then you say that no more work will be done until not only the old debt is paid, but a deposit is made on the new job.

Actually perform credit checks and, while you are at it, don't forget to give accurate information when someone calls you for a credit reference. If you can't afford Dun & Bradstreet or other credit checkers, find out if your banker knows them. And, without question, get money in advance from idiots and dreamers. If, against your warnings, someone expects to sell 250 shirts to a crowd of 300, or thinks shimmel shirts will go well at a fishing derby, get cash or a certified check up front.

She never gives up!
The best thing you can do is hire a good bookkeeper or a person who simply duns effectively. You must do this because, as the owner or manager of the company, you just won't get to it, or because you happen to be pals with the slow-paying company, or because you want that big new order and don't want to offend them.

My company has done its best collections in the past few years - even in a bad economy - since we hired Lori Dolan, our bookkeeper. She is polite but firm, prompt but not pushy and she never gives up. These are rare skills and worth hiring for. Even tiny businesses should find a part-timer to perform these functions, as doing so will generally pay for itself.

Finally, never feel guilty about approaching such activities in a proactive, even aggressive manner. After all, if you don't collect your money you don't have a business.

About the author: Rick Roth is president of Rhode Island-based Mirror Image. Between 1995 and 1997, his business took home twenty Golden Image awards in various categories, as well as top honors in the industry media's various printing competitions.

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