small
business
It’s in the mail
Negotiating
for payment
Payment policy
helps prevent
collection problems
By Leonard Sklar
YOU’VE MADE THE SALE, signed the
contract, provided the product and now …
where’s the check?
Customers who don’t pay on time are the
bane of any small business where cash flow is
critical. So what do you do when the payment
doesn’t arrive, and how can you avoid the
problem in the first place?
Many businesses create their collection
problems in two key ways. First, they don’t
have a clear, written payment policy that is
professionally communicated to all customers
prior to doing business. Second, when a payment is late, they ask for it in vague, wishy-washy ways, such as “How much can you pay?”
or “Are you having a problem?” or “Can you
send a payment on the account?” (See sidebar.)
Why are these problems so common? Primarily because of companies’ fear of offending
customers. But when money is concerned,
people like to know the rules of the game. If
you aren’t clear about your policy, many of
your customers will make up their own policy,
and you may not like it.
A written payment policy should spell out
when the payments are due, whether there are
any discounts for prompt payment or penalties for late ones and when accounts go to a
collection agency. To soften the tone, include
topics such as a return policy, options for payment (cash, check, charge card) and how
happy you are to have their business.
Just creating such a policy has many benefits. For example, Steve Christiansen, president
of Impact Paper & Ink, a Costco member in
Burlingame, California, says, “Having a policy
let both sales and office staff know exactly what
to do and when. Employees felt confident, and
sales definitely improved.”
Creating the payment policy is just the first
step. Now you must communicate it skillfully
to your customers. The ideal time to do this is
before you do business with them.
Ask new customers if they have any questions about the policy. Because people are
often reluctant to ask questions, you might say,
“Many of our customers have had questions
about some part of our policy. Which part
wasn’t perfectly clear?” That approach makes it
safer to ask questions, but if none are forthcoming, point out which part or parts of your
policy may have caused problems in the past.
For your current customers, you can
introduce the policy with words such as “You
know, Mr. Barton, in the past, we haven’t been
as clear as we should have about how payment
is handled for our products, and we felt that it
was only fair to clear that up, so there aren’t
any misunderstandings.” For a good customer,
you can add, “You’ve been a great customer,
but you know there are always a few people
who make it bad for everyone, so we felt we
owed it to everyone to spell out our policy.”
It takes a lot of thought and hard work to
create or improve your payment policy and
communicate it fully to all customers. This
work pays off with a dramatic reduction in
future payment problems, better communication within your organization and happier
customers. C
Leonard Sklar, a Costco member in Redwood
Shores, California, is a collection consultant,
trainer and author of The Check Is NOT in
the Mail (Baroque Publishing, 1991). He can
be reached at lenwriter@aol.com.
ANYTIME YOU ARE OFFERED
less than payment in full, you are
in a negotiation, so it makes sense
to become good at it. Here are
some examples.
• If you are offered, say, four
payments, tell the customer the
most you can arrange is two. You
might compromise with three.
• If you are promised “a payment,” ask the customer to be
specific as to how much and when.
You don’t have to agree to unreasonable terms.
• If the customer pushes you,
defer responsibility to a third party,
such as your accountant or boss.
• If you are getting nowhere
with the customer, point out that you
are required to turn the account over
for collection and you hate to do that,
so please pay as requested.—LS
