Q) My small business has grown over the past year, but with the growth I also have more past due accounts. This is the first year I’ve had these problems. Am I doing something wrong?
Tom S., Boulder, CO
Dear Tom:
There’s an old saying “If you don’t have accounts receivables - why not?” I don’t know enough about your billing procedures to know if you’re doing anything wrong, but let me start by congratulating you on the increased growth of your business in what was for many a very difficult year. Because you are doing more business now you are experiencing the associated aches and pains of having more accounts to worry about. Let’s look at some basic structure that lays a good foundation for loss prevention.
Do you make your fees clear to the client before agreeing to provide your product or service? Some people are uncomfortable doing this and think it is counter-productive. Nonetheless, subjects like price, payment method and other contract terms should be covered up front. Make sure the customer understands his obligation to you before you do business with him for the first time.
What does your contract include? Do you offer a discount for quick payment? (Sometimes this is a good idea.) Do you specify a certain number of days after which the account is considered delinquent? Is there a clause that allows you to add collection costs, attorney fees and interest if the bill becomes delinquent? If not, those costs will come right out of your own pocket!
And when a bill falls into the delinquent category do you have a procedure to follow? If not you should have such a procedure and you should be sure to follow through on it. (I’ll deal with this topic in a later article.) Despite the delinquent accounts it sounds like 2001 was a great year for you. I wish you an even more successful 2002.
Jim Finucan is a 13-year collections veteran who has doubled the annual gross collections at every firm he has been associated with. His book “Past Due A Collections Manual” will show you how you can achieve the same results. http://www.tiare.com/pastdue.htm
