| Practicing as a Pennsylvania collection attorney in | | | | them, and most of the ones that do have |
| Bucks County, I am repeatedly asked this | | | | inconsequential late charges of 1%, hardly a |
| question by my clients in some form or another: | | | | coercive term. Make sure that your invoice and |
| "How can I collect on all of these past due | | | | or terms state that there will be a late charge |
| accounts?" This is a very serious question, and for | | | | assessed after 30 days, and make the charge |
| many of my clients, they have never had to | | | | significant with a minimum of 5%. I have seen |
| pursue past due monies before. Many of my | | | | owners get even more creative by escalating the |
| clients are small to medium businesses which | | | | late charge by the amount of days late, e.g. 5% |
| regularly service smaller communities in Bucks | | | | from 30-60 days late, 7% 60-90, etc. Additionally, |
| County, Pennsylvania. Once upon a time, the | | | | these charges only become effective if the |
| mere possibility of a negative reputation in the | | | | owner utilizes them, after all, a hollow threat is |
| local business community was enough to "coerce" | | | | really no threat at all. This is more of a long term |
| clients into paying, which is why most of my | | | | approach, as your customers need to realize that |
| clients were able to send out a simple invoice, net | | | | you will in fact issue and hold these charges |
| 30 days, and forget about it. It was a given that | | | | accountable. This will not happen overnight, but |
| the invoice would be paid an overwhelming | | | | over the course of time, customers will begin to |
| percentage of the time. Unfortunately, as it | | | | realize they cannot simply put your bill at the |
| seems for a majority of small business owners, | | | | bottom of the pile because your bill will continue |
| those days are gone. It is becoming increasingly | | | | to grow with interest. |
| more common for accounts to be 60 and 90 | | | | Conversely to late charges, another term which |
| days overdue without even hearing from the | | | | exudes a response to pay timely is an incentive |
| customer. This whole situation was summed up in | | | | clause. These terms reward prompt payment, |
| a conversation I recently had with one of my | | | | such as 5% off the invoice if paid within 15 days. |
| clients. He was totally frustrated and quite | | | | In this economy everyone is looking to save |
| disappointed in his customers that they were not | | | | money, giving them a reason to pay your bill |
| paying their bills on time, a concept that was | | | | quickly in order to save on expenditures is a |
| totally foreign to how he operates his business. He | | | | wonderful motivator. |
| summed up the economy with the old phrase "It | | | | The second major preventative measure deals |
| seems more and more that people are robbing | | | | with ease of payment by the customer. Making it |
| Peter to pay Paul these days." To which I | | | | easy for your customer to pay your bill is the |
| immediately responded, "Yes, but you have to do | | | | single most important thing an owner can do. The |
| everything in your power to be Paul, rather than | | | | two most significant tools you can utilize are |
| Peter." | | | | credit card machines and payment plans on large |
| One of the biggest concerns to many of my | | | | accounts. Everyone knows that people are much |
| clients is the fact that they are in a service | | | | more willing to swipe their credit card than to |
| related industry. The concern is that there are a | | | | issue you a check. Start using a credit card |
| finite amount of customers out there (even less | | | | machine and state on your invoice that you |
| nowadays), and they want the best of both | | | | accept credit cards. You will of course have |
| worlds. They want to collect their money and also | | | | overhead with the machine and processing fees, |
| keep the customer, making a "no holds barred" | | | | but these pale in comparison to not getting paid |
| approach to collecting money an option of last | | | | at all. Plus, you can work these fees into your |
| resort. This is not as large of a concern for major | | | | invoice to cover these added expenses. |
| companies because their size allows them to pull | | | | The second tactic is using payment plans. These |
| customers from a much greater geographic area; | | | | should only be used on accounts with large |
| but for the small business owner, the customer | | | | balances and only with those clients you are |
| base is much more finite making every customer | | | | certain will make the payments. You must be |
| a valuable asset, not readily tossed aside. The | | | | careful in implementing payment plans. You want |
| simple truth of the matter is that many business | | | | to be relatively certain that not only will the |
| owners have a lot within their power to prevent | | | | customer make good on the payments, but also |
| some accounts from going past due. Additionally, | | | | that the timeframe of the payment plan brings |
| the small business owner needs to have a | | | | the customer current within a relatively short |
| streamlined system in place that, should an | | | | period of time. Payment plans can have a positive |
| account become past due, the account gets | | | | mental effect on customers with large overdue |
| acted upon quickly with proper safeguards in place | | | | accounts. Instead of them seeing a large overdue |
| that minimize the amount of time, energy and | | | | balance that is insurmountable, payment plans can |
| money expended by the owner in chasing his | | | | be seen as attainable goals for the customer |
| money. | | | | making it more likely to be paid rather than giving |
| The first preventative step deals with the owner's | | | | up on the entire balance. For these reasons, |
| terms, assuming that they have terms of course. | | | | payment plans are not necessarily favored, but it |
| I am constantly surprised by the amount of | | | | does beat the alternative of not getting paid at all. |
| business owners that simply send out an invoice | | | | These simple techniques can be utilized by the |
| with no terms whatsoever, just based on the | | | | small business owner to alleviate collection |
| understanding that invoices should be paid within | | | | problems before they even begin. Future articles |
| 30 days. There are two basic terms that can | | | | will deal with what happens when these |
| have a significant impact on when (and if) your | | | | preventative measures are not fruitful, and |
| invoice will be paid. The first is the often | | | | additional measures must be taken. |
| overlooked late charge. Many owners do not have | | | | |