Doing collections rates in the top 3 of the most undesirable duties for anyone on my Team Operations, but there are ways to minimize the pain. The best way to do so is by implementing discipline and good Accounts Receivable (AR) hygiene. Here are some of my techniques:
1. Status of the overdue invoice should be front and center for every employee touching the account. Many times the slow payers will “remember” the invoice because they realize that the entire organization knows they have not paid.
2. Neuter product/service until the customer settles overdue invoices. If your tech team has some available time, I would ask for the capability to display reminder messages to anyone at your customer organization with manager/administrative level access. I have done it before. It is extremely effective.
3. Salespeople should not get their commissions or bonuses until the payment clears. Until it does, it is an unearned commission.
4. Do not provide the final deliverable until the payment has cleared. That includes language in the agreements ensuring all IP or work products are yours until payment clears.
5. Make sure that a fixed bid/flat fee project requires a deposit before the work commences.
6. Don’t make deals that have long AR terms. You are not a bank and financing the NET90s (or even longer) isn’t for you.
At the end of the day, what matters are your company, your employees, and your good customers. You can not allow all of them to get robbed of your resources by a bad customer.
Image credit: Strevo