Collecting Money

30 November 2010 Categories: Gerry's Corner

           Over the years I have worked with many small Businesses/Entrepreneurs. Today I want to talk about the Homepreneur, the Home Based Business, the personal service Business, the people who work alone contracting out their services. These services can include various forms of Consulting, accounting services, Electricians, Plumbers, IT services and the likes. Retail ( selling a product/products ) is not included in this piece. Usually these type of people are very good at what they do and do not like to work for an employer usually because of the freedom that self-employment offers them. In a start-up Business these same people usually struggle with Marketing their Business and maintaining accounting records. At a later date I will address these 2 areas. However today I want to concentrate on another Achilles heel these Entrepreneurs have. Believe it or not they have a problem collecting the money that is due to them for services rendered. Some feel like they are begging for their money. Some feel that they are bothering the client. Some are just embarrassed to call to say you owe me and I need to collect. If a person cannot collect what is owing to them after delivering a service then they should stay away from being a Business owner because this is a ticket to Bankruptcy. It amazes me why would you not make sure your money is collected in a timely fashion.

        I have been asked to help individuals who say they are not making money. One of the main reasons is they work and work then devote no time to calling their clients to collect on their services. They are actually working for free. In one case I worked with an individual who had receivables in arrears for 6 months. He should have been paid on a weekly basis let alone months later. Of course he was not making money he had in excess of $ 60,000.00 owing to him and he kept working for these same clients. In some cases they had lost his invoices. In other cases the client was delaying as long as he could because he was able to use this money for other aspects of his business. This is a common tactic for certain businesses; pay your invoices very slow and collect your receivables fast. Good business strategy if you apply it to yourself but bad if your client uses it on you.

       Here are some simple rules. When negotiating a contract, discuss the terms of getting your invoices paid and hold them to it, NO excuses. Stop the work you are doing till they pay you on time. Technically if you are not paid the client is in breach of contract. They usually don’t like that. Never get too busy to collect your money. Collecting on your invoices is a weekly activity not monthly or when you get to it. Nobody wants to work for free so why should you.