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There is only one thing worse than losing a deal. It’s winning a deal and then not getting paid! Many of us are quick to blame the customer for not paying us in a timely manner, or worse still not getting paid at all. I believe this situation is more in our control than we think.
In these more difficult times, when we are all trying to close every bit of business, it’s easy to relax our terms of payment in an effort to close the deal. The reality is that we need to not only be more careful with our terms but actually alter our terms to run our businesses better.
A known fact! 65% of all profitable new businesses go broke because they run out of cash.
I’ve had the good fortune over the last 15 years to witness many of my customers grow, right from their inception. A common theme has been seeing these customers get busier and busier, sometimes overloaded with so much business they didn’t know what to do with it. They were so busy running around town that they inevitably “dropped the ball” when it came to billing, let alone collections. By the time they realized it, their payables had piled up to where they couldn’t buy equipment or even worse, they were bouncing checks.
It’s easy to fall into the trap of letting your receivables pile up, thinking you have all this money owed to you and that it’s some type of saving account. It’s not! It’s a huge potential problem and as time moves on, things change. The customer may go out of business or have cash flow issues (especially today) or as often times happens you leave it so long they don’t think they owe you the money any more.
Here are some standard IT/Telecom industry policies you should adhere to. Following these will help you get paid and to become more profitable.
Leasing Equipment: Never under any circumstances deliver or install equipment into a customer’s location without getting signed lease documents and anything else the leasing company requires. Preferably get a, “go ahead,” from the lease company before you start. Once on their premises they can tell you to leave, keep the equipment and the only recourse you have is to sue them. The people that do that don’t care about getting sued.
Cash Sale: Always get a deposit for 50% of the value of the contract or at least the cost of materials & equipment; before you start! NEVER start a project without a signed agreement. The agreement should spell out what you are doing, what you are not doing, where/ when you will start and when you will complete the project. Finally, make sure you specify how much and when the customer is obligated to pay you. This will avoid unnecessary arguments and ensure that your customer understands when you should get paid. Whether it’s your marriage or business, we all know that 95% of all disputes’ originate from miscommunication.
Service Calls: Receivables for Service Calls can be your most profitable revenue but they also amount to the most work when it comes to collecting the money. Some of my customers have been very successful by offering 10% discount for payment on completion (just bump your rate by 10%). Getting paid on the spot should be your ultimate goal. It also eliminates any potential dispute over your bill. Don’t be afraid to take credit cards either and in your line of work, paying a few percent in merchant fees is easily offset by having your cash now, not having to chase money or pay interest on money that should be in your pocket. You can open a merchant account via Costco.
Remember, you work hard, provide good service and run an honest business; you are entitled to be paid in a timely manner. Anyone who doesn’t respect that is not a customer, they are a predator. The sooner you realize that the fewer headaches you will have and the more money you will have in your pocket!
Good Luck,
Hugh Vujnovich
President
Clearcom Networks
This Month’s Quote:
The purpose of your organization is to meet your customer’s needs; that’s the game.
Profits are the score!
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