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).

What Businesses Can Learn About Success from the World Cup

Now that the World Cup has come and gone, I noticed that teams’ success characteristics are similar to company success traits. Here are a few:


Leadership – The teams that went far in the World Cup had inspired leaders. Argentina’s Diego Maradona, for instance, has not been coaching for long but his passion, energy and love for the game served as motivational tools for his players. Argentina's players seemed to tap into Maradona's energy and Argentina went far in the tournament. The same is true for leadership in business. A successful company is usually accompanied by an inspired and passionate leader who sets a positive tone for his employees.

Desire to Win & Never Give Up – Many of the World Cup teams were similar in ability. Many times, what made one team win was the “fire from the inside”. The U.S. team had this quality. Landon Donavon and the rest of the team had a "never say never" attitude that helped propel the U.S. to the next round. Businesses must also have a similar unwavering drive to succeed. Many companies recently have re-emerged from bankruptcy with good leadership to fight another day. The desire to win is necessary for long term company success.

Confidence & Enthusiasm – Ghana is a team that had the confidence to go far in the tournament. In many games, they were playing a country with technically better players and better overall records; however, they managed to level the playing fields with a collective belief that they could win. And despite the odds, they managed to advance almost to the quarterfinals. The same is true for small businesses. A business must believe in the idea that it can succeed in order to succeed. When facing any opportunity and/or problem it's the "I CAN" attitude that will help get a business to the next level.

Timing – The best teams knew when to strike and when to pull back and guard their leads. Germany is an example of a team that “went for it” when the timing was right (and scored sizeable leads), and retracted when necessary. Businesses that succeed know when to strike and when to be conservative. It's key for a company to understand good timing in order to maximize opportunities when available, but then guard its assets and retract when times are not so good.

Skill – The teams that went to the final rounds ultimately had some of the most skilled players (and the above characteristics). It is also important for businesses to have and deliver the best products in the most professional manner possible. For professional services businesses, the skills of the professionals should be refined regularly and new skills learned in order to stay competitive. Prior to this year's World Cup, only six countries had ever won this title. This year, a new country ( Spain ) has been entered among those prestigious ranks and added to the record books as a World Cup champion. Similarly, with the proper guidance, passion and expertise, there is always room for a new company to advance to the top.

2010: A New Decade and New Threats for Small Businesses

Although 2010 is poised to be a turnaround year for small businesses, and things may start to seem a bit rosier, business owners must anticipate emerging threats and always be on guard. The tides can turn at any moment. A new competitive force could emerge and knock you on your feet. New legislation and tax codes could prove harmful. Or, as is the fate with many small businesses, Google could decide to take over your industry sector – then you are in real trouble.

Below are the emerging threats as I see them for small businesses in 2010 and beyond.

The Uncertainty of the Tax Code – Nobody really knows what will happen with taxes in 2010 and beyond. With our biggest deficit ever and anticipated additional spending over the next few years, it is almost certain taxes will increase. In fact, the major provisions of the Bush tax cuts are scheduled to “sunset” as of the end of this year. As a result, this will give less incentive for an entrepreneur to grow a business, and give private equity less incentive to invest in speculative but higher rates of return.

Competition from the individual 1099 contractors -- Although 1099 contractors are somewhat entrepreneurial in nature, professional services firm will face major competition from individual contractors (in the US and overseas) in addition to other competing firms. Tom Freedman’s book “The World is Flat”, explains this challenge and the challenge is a threat now more than ever -- with so many out of work professionals.

Access to Capital -- Although the Obama stimulus has earmarked hundreds of millions of dollars for SBA loans, companies still are finding access to this money harder than expected. In addition, the Venture Capital funds and tolerance for risk simply does not exist going into 2010. Entrepreneurial companies must become profitable from the start and not count on debt or equity for help.

Surely this is just the tip of the iceberg in terms of threats. As always, I welcome all comments, feedback and insights.

“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?

2010 Small Business Tips: You Have Weathered The Storm; Now What?

For many small business owners, 2009 was a year of reckoning. We experienced the worst economic meltdown since the Great Depression and many industry pundits and economists are torn as to whether or not we are actually experiencing a recovery.
Regardless of what the economists are saying, small businesses need to operate with a completely new mindset – recovery or not. 2009 was all about survival and if approached correctly, 2010 can potentially be the year for small business to go beyond survival to prosperity mode.

So, small businesses have weathered the storm – so to speak. So, what to do now? Below are some key tips and lessons learned that will help speed the recovery process for small business owners.

Lesson Learned #1: Make Deep Cuts When Businesses Future is Uncertain. The key to business survival is to stay profitable. So, how does one do this? Simply put; you may need to lay off more employees to stabilize the business. It does no one any good to keep employees around if the company is then at risk months later. Companies tend to do the minimum amount of layoffs of employees but then put themselves and remaining employees at more risk shortly thereafter.

Lesson Learned #2: Take More Money than Necessary. Businesses tend to raise the minimum amount of equity or debt necessary based on a financial model that is usually not conservative. Before the Great Recession, companies should have taken as much money as possible during the period when capital was being easily distributed.

Lesson Learned #3: Get to Profitability As Soon As Possible. While venture-backed fund can certainly be the lifeblood for a start up – it is often like having golden handcuffs. These companies are at the mercy of the VCs. Their survival is solely dependent upon the next round of financing. There are many reasons for a VC to pull the plug and it may have nothing to do with the business viability. It could be caused by the VC’s own capital needs or the need to shut down the fund and start another fund. The key to not being dependent on a VC or the next round of funding is to have a self-sustained business.

Lesson Learned #4: Get The Upper Hand with a SBA Loan
Thanks to the American Recovery and Reinvestment Act, the Small Business Administration (SBA) is armed with $730 million for lending and investment programs. The maximum loan sizes have also been increased to $5 million (from $2 million). These loans are also reasonable in nature and achievable to obtain – take advantage of this.

Lesson Learned #5: Spend Money Now on Advertising
Now is the right time to spend money now of advertising for 2010. Simply put; the golden rule of spending money on advertising is a recession still applies. There is also a tax savings for 2009 for most small companies if the money is spent now (even if it is for advertising in 2010).

So, the big question is; what is your small business doing to make 2010 the year of business prosperity?