Yes, you need to sell, but you need to get paid for what you sell! What if your customer is having cash flow trouble? Worse, what if your customer goes under? Or more annoyingly, what if your customer is perfectly able to pay but simply chooses to be late, pocketing a little extra interest on the money for a while longer?
What tools do you have to make sure your customer pays?
If your answer is collection agents or courts, those are the slowest and most costly tools. They are such hostile methods, they can sour a relationship that may be worth saving. In these hard times, they take so long that a customer might be viable when you start trying to collect and out of business before you are able to collect.
Those tools should be last resorts, not primary. Your customer’s soft spots are your best keys to getting paid.
Using a Soft Spot
Let’s say your customer is of modest size. The price of your customer’s shares fell recently. In the past they paid on time, but now the money is not coming. They have enough cash flow. They are delaying payments to artificially inflate the next quarterly financial report and help their share price recover.
In this situation, I explained that my company reports late payers to one of the big credit bureaus. When my bill became more than 30 days overdue, the report would go in. Most small businesses do not know how to do that, but I do. My customer realized if that bad report showed up in their credit record, other suppliers would start demanding cash up front, which would make their quarterly report worse. They paid and were never again late.
But maybe your customer is big and can laugh about adverse credit reports. What if they have tight delivery schedules that cannot slip? With a behemoth like that, I used a stop-work clause to get my firm paid on time. After a brief test of my company’s resolve, the customer paid on time, not just to the end of that contract but throughout the next one. Everyone else was being paid months late. Then the customer went bankrupt, and other vendors got maybe 20 cents on the dollar two years late.
Shielding Yourself
There is always a pressure point somewhere. Everybody has a soft spot—including you. To be sure of getting paid, you have to protect yourself as well as find ways to get any lagging customers to do the right thing.
When your business is financially squeezed, you are at your most vulnerable. Too eager to land new business, you might sign a contract with no teeth in it. You might make a big delivery to a company that is not able to pay. Upon getting partial payment with a memo on it that says “full and final payment,” you might feel so relieved to get anything that you deposit the check, thereby accepting the memo and forfeiting your right to collect the rest of the bill.
The wrong sale can do more harm than no sale at all. Make sales on the right terms. Especially in bad times, you dare not do less.