What to do when faced with bad debt
There you are, delivering a fine service, charging a fair rate, staying within budget and yet getting your invoice paid is like drawing blood. What’s going on and how can you change this?
Not getting paid and chasing money can make you feel like giving up. But while it’s easy to point the finger at your clients and customers, the solution may just lie within.
Okay, let us explain. Often when faced with bad debts (or debts that are getting worse by the day) a little part of us is not totally surprised. Sure we complain like mad, and blame all sorts of things and people, but still a little voice is saying ‘Told you so. Told you so!’
So what did we miss? Here are some key questions to ask yourself that may hold the key:
Are my billing systems realistic, in place, enforced and respected?
We all need to have procedures in place regarding quoting, invoicing and taking payments and we need to stick to them. Thereby making our terms and conditions clearly communicated to our clients.
This is a fairly basic place to start, but an area that is regularly overlooked. Procedures can be a bit like business plans. They get lots of attention at some point in our business and we spend hours crafting and fine-tuning, only to file them away in the Cabinet of Oblivion. They’re not going to help you there!
An important point to remember is that if a system or procedure isn’t working or consistently isn’t adhered to, two options exist. Get a big stick and enforce it; or change the system.
For instance, sometimes changing the system can make life a lot easier. For instance, 14 day payment terms for a corporate client may not be realistic and you may need to negotiate terms that better fit their policies.
If both sides have the same expectations at the start, there is much less frustration and wasted energy chasing payments that can’t be hurried up. Look around at what works for others and you may see a better way to run your own systems and procedures.
Did I overlook any signals on the way?
Clients who are bad payers regularly send little signals along the way. Furthermore, the problem is we ignore them, because they’re clients and the client is always right. Right? W-r-o-n-g!
For the client to be right, they first need to be the right client. Take a look at things you’re turning a blind eye to and thereby you’ll see what we mean. Here are some examples:
- Your client doesn’t really ‘get’ what you do.
- Signs abound that there is little commitment to your involvement – cancelled meetings/ unprepared clients/frequent unmet promises.
- Goalposts moving… constantly.
- Basic areas of your work being questioned with too much focus on the small stuff.
Get the picture? If someone is not ‘buying-in’ to what you’re doing, they’re not attaching much value to it and why would they pay for something they don’t value?
Did I listen to my intuition?
What did your intuition tell you at the outset? Furthermore, how might you have given it more airtime?
It’s not that you should automatically run a mile when your intuition-monitor goes berserk, more that you should have a procedure for this circumstance. Let’s call it: The vigilance procedure. Business on full alert.
Listen to your intuition. Give it the time of day.
When and how do I start chasing payment?
Ever been a shade clumsy with your chasing? Got a teeny bit emotional perhaps? Maybe took stuff out on a debtor when really your failure to follow your own procedures or listen to your intuition were what caused the frustration? These are very common reactions.
Your client may not always be right, but conversely neither are you. Be careful with this blame stuff, when it comes to money, ‘losing it’ usually results in losing it, if you get our drift.
If you think your business might benefit from bookkeeping services. Maybe you need someone to lodge BAS. Perhaps you need a bookkeeping software health check, setting up your books. Then above all don’t hesitate to get in touch. We’ll tailor a package that sets you up correctly from day one.
Contact Timewise Financial Solutions on 0419 181 082 or by clicking here today.