Chasing payments like an Olympic champion
If “chasing” payments increased fitness as much as chasing the footy around did on a Saturday afternoon with your mates, then I bet sometimes it feels like you could run in an Olympic marathon, and win.
Chasing payments is certainly one of the unfortunate realities of owning a trade business. Although it’s not a topic that should need discussion, the rising accounts receivable of many trade businesses necessitates it.
When you’ve shown a customer exceptional service, completed their job promptly and done so to a high standard, it seems unfair that all of a sudden you need to chase them for payment. The harsh reality is that late paying (or even worse, non-paying) customers can completely ruin an otherwise healthy trade business.
Not only does chasing payments cost you or your employee substantial amounts of time (in effect reducing productivity), but, unfortunately this owned money is not technically yours yet. This means it cannot contribute to your financial security and equally cannot be invested in business growth (hence slowing the growth rate of your business).
Sometimes having money owing is something that can’t be avoided. You can however, lessen the amount owed by customers as well as increase their frequency of payment (and get your money quicker) by implementing terms and follow up processes moving forward.
There are many ways you can approach customer payments and the ‘correct’ way depends on your specific trade, the types of jobs you attract, your clientele and simply how you wish to run your business.
For maintenance style work or smaller jobs, a suggestion that’ll eliminate any customer debt is to collect cash, card or cheque on site at the completion of every job. If customers aren’t on site at the time of completion, then call them immediately to collect payment over the phone.
To assist with this process, we explain over the phone when the job is booked in, that “we require payment on completion”. This way there are no surprises when the tradesman asks “how will you be paying today?” on completion of his work.
When completing bigger jobs, you may choose to stipulate in your contracts that periodic payments are to be made at the beginning (with a deposit), and at the completion of different stages of the job. This gives you the power to increase the pressure of expecting payments throughout the work, or worse case walking off a job if need be, if the customer continues not to pay. As a result, this will reduce your loss should they end up not paying entirely. This will also increase customer motivation to pay as they’ll just want the job done.
If you work with strata companies allow 30-day accounts. But don’t forget to follow them up.
Follow up process
Before following up invoices you need to legitimately understand how much is owned and by whom. This can be done through an Aged Receivables Statement (get your book keeper to send this to you weekly, or print one off yourself from our could accounting package).
Many businesses choose to use automated SMS or email invoice follow up processes. However, reminders via post will avoid your follow up disappearing amongst the busyness of an inbox.
For a 30-day strata account, we send our statement every 2 weeks within the 30-day period followed by phone calls after 30-days.
For invoices still outstanding after 30 days, we send a statement and copies of the outstanding invoices on coloured paper (pink, blue or yellow so they have cut through in the pile of while paper of an in-tray). These are also followed up with ‘friendly reminder phone calls’ on a weekly basis.
When working with businesses and strata companies, it’s very helpful to build friendly relationships with them. This will aid communication, transparency and thus drive clarity about payments. Remember; if you are a friendly pest, someone that calls all the time but asks nicely about payment, who do you think they pay first? The person that they owe money too but doesn’t call at all, or the friendly pest? Yes, you guessed it. They’ve successfully stopped your phone calls and feel relieved!
With hope this article has sparked some ideas that will have you spending less time chasing payments and spending more time growing your business.
- Join our Kick-Ass Tradies Facebook Group, for access to trade business specific conversations, tips and resources, plus a like-minded community of tradies.
- Book a 15-minute Game Plan Call with Andy, owner of Dr. DRiP plumbing and co-founder of Lifestyle Tradie, to clarify your priorities and get clear action steps.
For more information on understanding the numbers in your business, visit Next Level Tradie for our schedule of live events.