S M A L L - B U S I N E S S - P R O B L E M - N U M B E R - 1

Getting your customers to pay their invoices and accounts that are due to your business

When small business owners take stock of their companies' year-end finances, many undoubtedly get an unpleasant surprise, a pile of unpaid receivables that have accumulated over the months.

In such a case, there are two problems business owners must address. They must get the money that are owed, and if there is a sizable amount of receivables, avoid a similar situation in the future.

Getting your customers to pay up can be dicey, especially if you want to keep o doing business with them, said Eric Tyson, author of "Small Business For Dummies." (For a copy of this book, click on this link Small Business for Dummies)

"You have to be careful not to tick off clients or offend them in any way, but still try to get them to pay," he said.

Of course you are going to want to call or e-mail customers, but before you start screaming, you need to find out why they are not paying. Often customers don't pay because they are having financial difficulties. But the problem might rest with your company; perhaps your customer's non-payment is an expression of dissatisfaction with your product or service.

When a customer is struggling with cash flow and other problems in the short term, you might find you need to compromise. Tyson said, noting that "its better to get something instead of nothing." Moreover in the case of a customer you want to keep, you will engender plenty of goodwill by being understanding while they are getting their finances in order.

Probably the best approach is to work out a payment schedule with the customer.

If its not money issue, "make sure its not something you have done or that your employees did," Tyson said. And if the problem is at your end, his advice is to "listen non-defensively." (see footnote No.1)

He recommends business owners make a real effort to rectify the situation and, again, consider a compromise over the bill.

"People are willing to shop around if they get lousy service," Tyson said. "Don't make the mistake of underestimating the long-term revenue and profit potential of a customer."

Of course, some people balk at paying simply because they are bad customers. Once you have established that there are no other reasons for their nonpayment, you need to decide if you want to go to the expense of a collection agency, or the time and costs required for small claims court. We use the services of "Online Debt Collection Agency."

Tyson noted that with bad customers, its probably no great loss if they respond to your actions by turning to one of your competition. So getting tough won't hurt you.

While dealing with the unpaid invoices that have already piled up, you need to look at your accounting system and determine how to avoid the same mess going forward.

Some business owners are paid late simply because they don't get their bills out on time. This can be a problem for entrepreneurs, whose talents often lie more in building a business, not doing the administrative chores. It's also a problem for people who are disorganized.

Tyson said some business owners might do better by requiring payment up-front, in much the same way many doctors or dentists require a fee to be paid at the time of service. This is also a way to ensure that customers who are slow to pay don't fall behind.

Whether you take that approach or use invoicing, you need to have a good accounting setup that will help you track bills and let you know wether you have been paid. Software designed for small business can help accomplish that.(see footnote No.2)

If you don't have the time or patience to deal with receivables, you should consider getting outside help, such as a billing service. (see footnote No.3)


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There are other, more strategic ways of improving your payment rate. Tyson noted that in prospecting for new customers you need to think about their ability to pay, and their past payment record. That calls for a credit check, another expense, but again, probably worth it to avoid headaches in the future. Plus another very useful business tool we use, which helps you to find debtors and hidden assets is the Net Detective

(This material was adapted from an article by Joyce Rosenberg who writes for the Associated Press)

Footnote No.1. If you work with difficult, unpleasant customers or employees, check out "the bible" on difficult customers. "Defusing Hostile Customers Workbook". Buy Conflict Prevention In The Workplace - The Book (Electronic Delivery) or Buy Defusing Hostile Customers Workbook - Electronic Version

Footnote No.2. We use and recommend Quickbooks software for our bookkeeping and accounting requirements, and to use this software proficiently, click here

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Learning the Basics of Financial Accounting -  This course covers the basics of Financial Accounting.  Topics covered are: The accounting cycle (transaction analysis, adjustments, closing). Buying and selling inventory. Costing inventory. Internal controls and cash. Receivables. Fixed assets and depreciation. Financial statements: Income statement, Statement of retained earnings, Balance Sheet, and Statement of cash flows. The method of instruction is a combination of lecture and exercises we work through together. Also included in the course is a workbook that has problems to work through (answers in the back) as a way to practice your skills. Take this course now and learn financial accounting basics. Introduction to Small Business Accounting Training Tutorial

Footnote No.3. Visit our web page on Financial Services, regarding assistance in setting up a service which will help you control bad debt, click here

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