By Pavlo Phitidis
Finding customers is one thing, and servicing them another task entirely. But getting paid…can be a dilemma all on its own.
With the rise of the freelance industry, and a significant project-based work trend developing, debt collection has become an even more critical pain point for small businesses. Notably too, the process of collecting monies owed to growing businesses is critical, because it can affect the company’s short and long-term development. Unfortunately, legal or court processes in South Africa are far more focused on serving the needs of big businesses, and these can be highly expensive for a small concern to take on. There are, however, useful and innovative ways to tackle the problem of getting paid.
Bruce Whitfield, host and presenter of The Money Show on Radio 702 and CapeTalk, and I had a great conversation on how to get this issue sorted! Listen in hear or read on below.
Knowing Your Business Well
You can effectively minimise your risk of not getting paid by building effective systems that manage your customer relationships. Being able to objectively evaluate your customers, and thereby ensure that you’re extending credit to the right ones, can mitigate your risk of not getting paid. A small fishing tackle and camping supply chain, owned many years ago, by Pavlo of Aurik, ended up being a debt-laden concern, and it serviced a network of more than a thousand independent retail stores. By ensuring that each customer was visited, understood and checked up on, effective and efficient systems could be built to better evaluate and mitigate the company’s risk in offering credit. If possible, take some time to research your customers and find out if they’ve been involved in any non-payment incidents – a quick online search could offer you key insights into how they handle their supplier relationships.
Building Effective Systems
Of course, servicing a large client base means that you, the business owner, cannot do it all. That’s where effective systems become important, enabling you to delegate the supervision of client evaluation processes. Moreover, letting your business systems do the initial hard work of trying to get you paid, always pays off. Use smart accounting software, linked to your bank account and your customer relationship management software and automate the pleas, calls for payment, letters and activities as much as possible. Submit your invoices on time and create automated follow-up procedures, so that you don’t have to build towards creating the pressure of getting paid first.
Set Up Your Debtors’ Policy
Setting up a debtors’ policy, before you even begin to do the work you’ve signed up for, is essential. Ensure that your contract with your customer adequately details payment terms and conditions, and get that signed.
Understand the Psychology at Play
As a small business owner, you may find yourself tempted by the big deal. Remember, however, that the growth of a business and creating an asset of value is a cumulative process. Wealth is not made through one big deal, although it may be tempting to think so. If a big deal lands on your lap, before you’re fully able to fulfil the requirements of it, you may be setting your business up to fail. Your business’ ability to deliver on that deal will be the critical point between getting paid, and closing. Rather, temper your greed by focusing on the smaller deals first, and remember that wealth is cumulative.
Adopt an Unconventional Approach to Getting Paid
There is great value in nagging, and being persistent in your pursuit towards payment. If, however, that is clearly not working, it may be time to adopt a more unconventional approach. If the payment is worth it to you, book off a morning and head to your customer’s office. Make yourself comfortable in reception, and let their accounts department know that you’re awaiting payment. The bonus part of doing this lies in the time you’ll spend waiting – you could use that to catch up on emails or write your next big proposal. Alternatively, an even more unconventional, but entirely legal, approach could get you paid quite quickly, as I outlined during The Money Show with Bruce Whitfield. As a supplier to a retail store, my business was owed a significant amount of money by a particular store. During their busiest time of the week, my then-girlfriend visited the store and spent more than three hours trying on every single item of clothing on display. Eventually, she ended the visit by walking out without buying anything, simply quipping to the in-store manager that: “Pavlo sends his love.” By the next Monday morning, a payment confirmation had made its way to my office.
Your business needs effective systems to ensure that you get paid on time. Aurik can assist, by helping you create great commercial processes and systems that make it easier to focus on your core business. Together, we can help you to create an Asset of Value. Get in touch with our team at Aurik and let’s build systems that serve your business and get you paid.