The Pursuit of Payment: The Secret to Getting Clients to Pay On Time

For any small business, payment from clients and customers is the life-blood for keeping an organization alive. Without a doubt, one of the biggest challenges that small businesses face in this economy is getting paid on time.

What many small businesses don’t realize that getting clients to pay on time is an art form -- taking a certain amount of finesse, tenacity and friendship building.

Following is the secret sauce that I use to get clients to pay on time.

Tip #1 – Have your “finance person” follow-up on all payment matters. If you are the person doing work for a client/customer, it helps that you are not the one following up on payment related matters. This creates a layer between you (the client service person wishing to keep and grow the account) and the need for payment. If do not have someone, find someone (your wife/husband/”accountant" just might do the trick).

Tip #2 – Send invoices out in advance. If the work is going to be performed and billed on a certain completion date, send the invoice out in advanced of that date with the expected completion date on the invoice. The goal is to get the invoice into the accounting system as quickly as possible, even if the invoice date is in the future.

Tip #3 – Send regular statements (via email and in hard copy). On a monthly basis (at a minimum), revisit your Accounts Receivable listing and create a process of sending statements to clients who have not paid.

Tip #4 – Be friendly, appeal to the “human side” and befriend the Accounts Payable person. In the beginning of the pursuit of payment, the old adage “you get more flies with honey” is extremely true. The goal is to become friends with the Accounts Payable person and make every correspondence upbeat and friendly. Make sure to thank the person for any effort but be sure to ask for specific expected payment dates.

Tip #5 – Talk to others in the organization. If the Accounting person is not paying the bills, the chances are great there is a reason (these people are usually agnostic with respect to who is getting paid). Make sure to talk to your client/customer liaison as soon as possible and ask for reasons why the bills are not being paid.

Tip #6 – Stay away from lawsuits. In my early years of playing this game, I was keen to involve a collection lawyer early in the process. I have found that it is much easier to appeal to a person’s sense of doing the right thing then threaten a lawsuit. If the client is now a former client and simply does not return calls, etc., engage a lawyer to write a threatening letter and do the minimum at first on an hourly basis and not on a contingency basis (which is usually a third on the balance).

SMB News Roundup: Stimulus Relief Extends for SBA Loans; SMB Bankruptcies Up in California; and Secrets of a Serial Entrepreneur

As the small business sector is so vital to the health of our economy, there is no shortage of business news regarding efforts to pump life back into this economic engine. For this post, we have decided to highlight all the key stories and developments in the SMB sector – from the good, bad to the ugly. Read on and feel free to share your comments and insights.

Stimulus Relief Extended for SBA Loans

The Senate voted this weekend to temporarily extend funding for two popular stimulus provisions that reduced fees and boosted guarantees on Small Business Administration-guaranteed loans. The provisions, which helped bolster small-business lending over the past year, had run out of funding in late November. With the new extension, included in the Defense Appropriations bill, the government's maximum guarantee on SBA loans is restored to 90%, compared to pre-stimulus levels of 75%. Fees that the agency normally changes banks are also waived. Read the full Wall Street Journal article here.

Small-Business Bankruptcies Rise 81% in California

The Obama administration's new plan to give a boost to small businesses reflects continued trouble in that sector, which is facing new failures even as much of the nation's economy is stabilizing. As credit lines have shrunk and consumers have cut back on spending, thousands of small businesses have closed their doors over the last year. The plight of struggling firms has been aggravated by the reluctance of banks to lend money, said Brian Headd, an economist at the Small Business Administration's office of advocacy. Read the full Los Angeles Times article here.

Obama to Meet with Small and Community Bankers

President Barack Obama will discuss the economy, lending to small businesses and financial regulation when he sits down at the White House with representatives of a dozen small and community banks. Obama scheduled Tuesday's session as a follow-up to a similar meeting he held last week with some of the nation's top bankers. Read the full AP story here.

Small Business Lessons From a Serial Entrepreneur

It is always inspirational to see stories about serial entrepreneurs who have lived through all of the successes and failures. Check out this “Biz Beat” blog post from the Atlanta Journal Constitution on serial entrepreneur Hank Datelle.

“Up In The Air:” Laying Off Employees is a Good Thing

In the Jason Reitman’s hit move “Up In The Air,” George Clooney plays Ryan Bingham, who is a corporate downsizing expert who essentially lives on the road and is a hired gun who does the dirty job of laying people off.

While I have not yet seen the movie, I read the book by Walter Kirn and Clooney’s character in the book is often portrayed in a negative light for his efforts in putting a positive spin on laying people off. When firing someone, he presented it as an opportunity as opposed to something that was actually bad.

Of course, being laid off is a devastating blow for any employee. And, in the day-and-age, it has unfortunately become the cost of doing business. What is not often explored is the simple fact that laying people off can be a very good thing.

That is correct. Laying off staff is a good for business. As I mentioned in my previous post, it does no one any good to keep employees around if the company is then at risk months later. Corporate America is not always a cold place, and most companies tend to do the minimum amount of layoffs of employees -- to keep morale up and do the “right thing.”

The truth is that most companies put themselves at risk by only laying off the minimal amount of people. And, once the storm has passed, and business has stabilized, then companies can bring more talent back. So, is it worth putting an entire company at risk by having a bloated employee base?

President Obama Taking Steps to Help Small Businesses

This week, President Obama announced that he is pushing to eliminate capital gains taxes, extend write-offs, and create employment incentives for small businesses in an effort to boost to a segment of the economy still reeling from the downturn.

President Obama certainly did the right thing by bringing this issue to the forefront. The small business sector is the backbone of innovation for our country. It is also the life-blood of many people running smaller, localized businesses in smaller towns throughout the nation. The bottom-line is that the health of the small business sector is critical to getting our economy back on the right footing.

Specifically, Mr. Obama that he would extend break (through 2010) allowing small businesses to immediately write off as much as $250,000 in qualified investments, and a second break allowing small and large businesses to deduct more capital expenses upfront.

Of course, one of the biggest challenges for small businesses is the inability to get bank loans these days. Mr. Obama proposed to eliminate fees and increase government guarantees in 2010 for loans from the Small Business Administration. He said the Treasury would step up loans to small businesses from the bank bailout fund, the Troubled Asset Relief Program.

These are all certainly steps in the right direction for this beleaguered sector. I look forward to seeing how these efforts will pay off in 2010, which will be a critical year for our economy. Stay tuned for more small business news and tips from this blog. And, I welcome all thoughts, comments and feedback.