Profile - How I Get Clients To Pay On Time

An Upfront Approach Nets Results From Customers

Sharon BrillA recent survey by firm Rocket Lawyer found that one out of every four small-business owners is struggling to collect on-time payments from customers. Even more troubling, data showed that 43% of small businesses have customers who are at least 90 days late on their payments. Can anything be done to reverse the trend?

Sharon Brill, president of Virginia-based distributor Raelyn Marketing Promotions (asi/303873), thinks she has a winning receivables formula and she has the track record to prove it. "We have been in the business since 1991 and our debt ratio is 0%," she says. "We have written off less than $1,000 in 21 years."

So how does Raelyn Marketing – a two-person shop – do it? "We try to get the majority of our costs from an order upfront," Brill says. "It's kind of a test for the customer and that gives you an idea if they'll be able to pay on time. You also have to be careful about who you're doing business with and do some work in advance of a sale."

Here, Brill outlines her no-nonsense approach to getting clients to pay on time, offering tips for different stages of collections.

Q: Is there anything you do before taking on a customer to protect your company against late payments?
A: We state our terms upfront and insist on a 50% deposit on the first order. We don't care if it's a public company or a one-man show, we get the deposit. Also, we keep up with the media to be sure a prospective customer has not filed for bankruptcy or been in the news with financial troubles.

Q: What specific policies do you have in place to get customers to pay on time?
A: We bill everything net-10, which seems to get us on top of our customers' payables file. If we don't receive payment within 30 days, we are on the phone inquiring why and get a date commitment of when we can expect payment.

Q: How do you overcome the fear of upsetting customers with the terms you offer?
A: We have been in this business since 1991 and have a 0% debt ratio. It doesn't do any good to take the order if you don't get paid, so we never waiver on our terms.

Q: What terms do you extend to new customers?
A: We make no secret of our terms. We ask new customers for a 50% deposit when the order is placed and we bill the balance net-10 after receipt of the order.

Q: Don't these new customers balk at upfront deposits?
A: If a prospective customer balks at our terms, we don't need them as a customer. Every company has a right to establish its own payment policies.

Q: You don't offer customers discounts or incentives to pay early. Why not?
A: We've never offered early-pay incentives. Why give away money that you've earned when you don't have to?

Q: When a customer is late on a payment, what steps do you take to ensure your company eventually gets paid?
A: We always ensure our customer is happy with the product before we invoice them. If a payment is late, our chief financial officer is on the phone and he's the best debt collector I know. He inquires if they've received the invoice and asks if there's any problem with it and then he gets a commitment of payment by a certain date. If payment is not received on that date, he's back on the phone much firmer and somehow shames the customer into paying.

Q: What advice do you have for distributors who have several clients that pay late?
A: Don't put up with it. Why deliver products if you have to fight to get paid? We raise prices on perpetually late-paying customers to make up for the hassle of collections and typically those customers wind up firing themselves, which is fine with us.