30 days.. no pay now what?

[chilibowl]

I have a business in the service/repair industry, the majority of my customers are in the food service or food supply. Everyone has an open account with ten day terms from time of repair... I understand that some of the national/corprate customers have billing cycles, and I get paid when I get paid, but I also have many "Local" customers as well, and they can string payment out 30 to 120 days past due... I think it's because I don't hound them or charge any late fees.. What can I do to get paid on time???
Half of my receivables are past 30 days, I really don't have the time to chase money all the time and work on top of it.. I have started makeing monthly reports and try to take a coupe of days each month and chase money, but this really is fruitless and time consuming.
I've talked to some business mentors about raising my labor rate 15 dollars an hour for everyone out side of the thirty day mark, untill the account is current..
He says that not ethical and suggested getting credit cards to back the credit accounts and haveing them all sign an aggrement to allow charges after thirty days... but even with this signed agreement I think that this is unethical itself.. because It's an open agreement like a blank check I wouldn't want anyone to fill a blank check on my behalf espically if I didn't approve the charge. even if I did want service... I also think the potentional for "hard feelings" is very high here as well..

So is there any win win way of doing things... I have a business that is limited in that I'm stuck servicing a small portion of the refrigerated supply line between the packing houses and the General population.. I can't just put an add in the phone book and drum up new business. at the same time. The companies that service the restraunts and food stores that everyone goes to only has a choice between me and the local dealerships.. Which by the way still charges nearly 10.00 more an hour than I would if I charged my rate plus 15... (They offer a 90 day national warranty on all repairs) I can't that's why there is such a difference in labor..

So tell me what you think!

 

[Linux98]

Will your customers be informed that they are paying the extra $15/hr? Or will they be under the impression that they are still paying the lower rate?

As long as they are aware of a price increase there is nothing unethical about that.

I force my customers to pay by credit card because I don't want to deal with collections. However, that may not work with your line of work.

 

[jangnim]

I gotta be honest here. If these folks think your services are of so little value, you have to do something to get paid. I think making them have a credit card on file is a great idea since it forces them to take responsibility for their debt.

From a biblical standpoint, these folks are the wealthy, taking advantage of a slave. It happens, yet the slave is called to continue in service. However the analogy falls apart here because even a slave had his basic needs met by his master. So from that view point it is not at all unethical to take their cash from a credit card.

I honestly wish I had a customer base large enough to have this problem

 

[chilibowl]

Yes they would be informed that any debt outside of the agreed 15 day terms will be charged the higher rate... Actually we talked about just raising out rate 15 dollars and giving those who pay on time a 15 dollar labor cut.. Do you think we should use both methods since both look scriptural?

 

[jangnim]

Yes they would be informed that any debt outside of the agreed 15 day terms will be charged the higher rate... Actually we talked about just raising out rate 15 dollars and giving those who pay on time a 15 dollar labor cut.. Do you think we should use both methods since both look scriptural?

If you mean that your regular rate will go up from say $10 to $25 and customers who pay on time will get a $15 per hour discount, this sounds quite right.

 

[growingupinhim]

try to collect upfront! If somebody did something for me..I like payment when the job is done..not a bill~

 

[heron]

Try a mixed contract...part paid up front, a minimum order per year or month, or a set monthly order (request autobilled?) with room for flux on additional orders... so they get used to budgeting the same amount per month.

Don't be afraid to walk into their offices to hand them the bill. Get to know the person who writes the checks. Sometimes they are instructed to only write checks once per month, and if someone slips up on the date, the setback is simply a careless paperwork error (not someone trying to sap your funds).

Companies do have tricks to float money, though, so be proactive about what you need. Bill them for your extra time if you have to chase them all over town to get your money. Write on your bills that collection services (agencies) of late payments and legal fees will be billed to the delinquent clients. Cover yourself as much as possible.

 

[newbeliever02072005]

Hello Chilibowl,

I worked for a small country dentist office for 8 years. Part of my duties was the receivables. The things I tried to attempt to do when collecting was make 3 attempts of contact. First was a courtesty call, reminding them of the debt. Telling them (not asking them) that $$$ was due on the account on this "date". Its all in the presentation. You take charge of your receivable and they will know there boundaries (atleast we hope) . During the call make sure that you inform them that you will follow up with them one week later. Then do it, if you do not follow through they will not take you serious in the future. During this phone call that is when you are informed from the customer "Oh yes, I mailed the check on this date" or "Oh I am sorry I haven't got a chance to mail that yet." If you get the "i mailed it" ...wonderful you will be getting paid soon. If you get the "I'm sorry"...that is when you stay firm and tell them that on the following week you will be sending them to your collection agency that you have teamed up with to help you with your receivables. The third attempt of contact is to tell them that you will send them a letter of confirmation of this conversation. That gives you a written record now of the terms of agreement. (i suggest, sending these letters certified or signature required. No excuse that they did not receive the letter).

I know that sounds like alot of work and will be in the beginning. You said you have some old acccounts still waiting to get paid on. Those accounts that are 120 days old, I wouldn't put to much hope in those accounts. Those are the procrastonators or struggling businesses. Those are the accounts that the collection agency can work to get. They have the patiences to perservere and collect on them. The agency that we used in the dental office was a great one. Find an agency that will work like the idea of "Piece Work". There is no sign up fees, no admistration fees, no percentages up front. They got paid certain percentages. The quicker the account was recovered the cheaper the percentage you paid, the longer they had to handle it the higher the percentage. The benefits of using this service is that it frees up you (the owner) of administrative duties. More time for you to go and get more business.

I think I might have given you an idea of how to deal with the past and present receivables problem. How do you lesson the receivables for the new and future business accounts. You said that you work in the service/repair business. Do you collect up front for your parts? This might be something to consider doing. Collecting for the cost of the parts does a couple of things. One keeps your accounts payable down to a minimum. Second is that it lets the customer know you want a solid commitment from them that they are serious about engaging in your services. It makes it a reality to them right up front. Money means alot to people (Unfortunately, but it does) so ask them to put their hard earned money down on a service they are wanting.

Set a plan, follow through with it and be consistant with it. Everyone likes there boundaries and know what they can and can't get away with.

I hope I didn't over step my bounds here and say something that is way out of line and wrong. If I have please correct me! Running a business is tough, I have worked for a small business owner before and it was a struggle, but we had to be firm with our standards. Otherwise you can get taken advantage of. I honestly believe too that if you take your business to prayer everyday, before you even start. Proverbs 3:5&6 Trust in the Lord with all thine heart ; and lean not on your own understading. In all thy ways acknowledge Him, and He shall direct your paths. If you set a plan that you think is pleasing to the Lord and then trust that things will work out, He will be there for you ALWAYS!!!! He will not forsake you and leave you hanging.

I hope I have help and not confused you any.

Take care and God Bless!
newbeliever
-------------------------------------------
Dear Lord for your guideance in chilibowl's life and business decisions. Lay on his heart the plan you would like set for him. Ease his mind and clear his thoughts that is not productive and fill them up with new and energetic thoughts. Help this child of yours, I ask this in your Holy and Precious Name...Amen!!!

 

[heron]

I like how newbeliever02072005 put it all very matter-of-factly. People who pay you are used to that.

When you first start out in business, you feel a little shy collecting money from people, as if you're taking something that was theirs. Practicing that tone she described will help you get used to it, and you will end up coming across more confident and professional in other areas too. They will respect you more.

 

[mnphysicist]

I went through the same issues...

As far as the 120 day rule, and the probability of collection, its true to a point, but some entities get in serious trouble. I've had a couple accounts settle up after 150 days, and they felt bad enough about it to provide additional compensation. However, this is an exception to the norm.

Today, I provide discounts for payments in 10 days, charge late fee's after 30, and if it were to go beyond 45, the dogs come out. It works pretty well. The other thing I do is weekly or biweekly invoicing.

If you don't keep an eye on your AR, it won't be too long before you are affecting your AR, and then you can run into big time trouble.

Ron

 

[Christina M]

Hi Chilibowl..

I own my own accounting business and over the past 18 years have had the same problems you have had....... what business owner hasn't!?

I put in place some steps that helped tremendously:

1. Make your terms "Payable upon prensentation"
2. Offer cash discount for those who pay in full, in cash.
3. Accept credit cards for those who cannot pay on time. It is worth the % the credit card company takes (try propay.com)
4. Certain things in my work, like tax returns, are "cash & carry". They don't get the finished product unless they pay me in full.

At first it was hard for me to be strict about it, but after awhile it becomes second nature. Also, you may lose a client or two because of your terms, but they weren't worth it anyway if that's the way they are!

If you don't value yourself and your business, no one else will!

(A worker is worthy of his wages, scripture says.)

 

[Dark Matter]

I think it's because I don't hound them or charge any late fees.

My friend, you answered your own question. When they sign your work order they sign a paragraph that states your payment terms, and the interest charged on all payments past the terms. Then you CHARGE THEM INTEREST if they don't pay on time. Send a new invoice, every 30 days, delineating the new interest charges. If they refuse to pay the bill, or they pay the bill late but refuse to pay the interest, you send them to collections. Period. End of story. You will find that if you do good work, people will respect you more and pay their bills on time. Nobody wants collections on their credit and everyone will act immediatelly once that happens.

This way, even if they don't pay on time this is still good for you, because you are making money on their late payment. The later they are, the more money you make, just not as quickly. You must not be afraid to send them to collections; however, be absolutely sure to send them a letter stating that if they don't pay, then it will go to collections. Be fair, but firm. That is just Christian business practice and will absolutely end your problem. If you don't feel the courage to do this, then you might reconsider being in business for yourself.

Don't change your hourly wage unless you do it for all customers. That is not the way to get people to pay bills. It is, however, a great way to not have them hire you again. You must be consistent with your billing and charges.

Dark Matter.