Networking Now

A few hints and tips that might be useful:

There are 3 types of non-paying customer:


* Can’t Pay (cash issues etc.)

* Won’t Pay (these are the companies that manage their own cash tightly)

* Shouldn’t Pay (you got something wrong)



A collector needs 3 things:

* Knowledge

* A system and processes that support them

* Motivation



Knowledge of

* Credit

* Your customers

* Your philosophy (how do you want your customers treated? Do you want a customer service based collections model or a cash driven collections model)


Knowledge of Credit

* They should have a basic knowledge of credit rules and laws

* They should understand the laws of harassment.

* Basics of contract law

* Payment laws such as financial instruments (cheques etc)

* Basics of taxation

* Basics of bankruptcy and the road to ruin


Knowledge of Your customers

* Understanding their structure; size, legal status etc.

* Understanding their type; can’t pay, won’t pay or shouldn’t pay

* To be able to influence people you need to know how to satisfy their needs.


Knowledge of Your philosophy

* How do you want your customers treated?

* Do you prefer a customer service based collections model or a cash driven collections model or a mix (knowing your customers helps this decision).


Most importantly, Knowledge of the Killer Questions

* Can’t Pay:

o “I notice that your payments are becoming later and later, is there a reason for this?”


* Won’t Pay:

o “Is there a reason why you are paying us to 60 days, when our agreed terms are 30 days? Is there a reason why you cannot pay us to 30 days?


A system and processes that support them

* System driven reports that update as payments come in.

* Risk assessment system

* Dispute management

* Written credit / collection policy with guidelines


Motivation

* Remember people get motivation from different areas:

o Internal – promotion, cash bonus, slap on the back etc.

o External – people like talking about how well they are doing and how the boss has praised them.

* Challenge v reward

o If you are going to offer a bonus for collections;

+ Keep it small

+ It does not have to be cash, certificates, a meal for two – something cheap and cheerful does just as good.

+ Remember if you offer one once, it is hard not to do it again.

+ If you have more than 1 collector, avoid rivalry.

Sean, just thought of something I would never have thought of had I not read that, if we need customers to pay at lets say 14-30 days from invoice, for our cash flow (which we do at the outside) and they have terms of lets say 90 (this has not happened yet) then do they have to state up front?

Must confess the Mrs understands all this a lot better than me, but still I think I need to know.

Kip FX Design wrote:Sean, just thought of something I would never have thought of had I not read that, if we need customers to pay at lets say 14-30 days from invoice, for our cash flow (which we do at the outside) and they have terms of lets say 90 (this has not happened yet) then do they have to state up front?

Must confess the Mrs understands all this a lot better than me, but still I think I need to know.

There are no legal rules that say that they have to inform you of 'their' terms up front. However, many larger companies will have terms & conditions that are 30 pages long and in one small corner somewhere it will say that their terms are 90 days and you then get into an arguement. Another thing I have seen on many occassions is that they will have their T&C's on the back of their purchase order and they will send it to you via email or fax!! and post an original, you don't see these until it is too late.

Always have 'your' terms everywhere. When you send a quote have them stated. When you send an invoice have them stated. If you notice their terms on anything go back to them and say that 'your' terms overried theirs as they accepted your quote.

It is becoming increasingly popular for companies to only pay at month end. Never accept these terms (unless from a business point of view you cannot turn it down), companies that only pay at month end always pay late (my personal experience from the collections industry) and they only make a limited number of payment runs in a month this gives them the easy chance to delay for up to a month. Most people are happy to get paid in the same month the invoice is due and this is where month end due dates are deceptive as the customer can take a full 30 days extra and in the collectors mind it is job done.

I tend to waffle when talking about these kind of things, so hope I've given you a response you can understand..

Waffle away, I always find that the wafflers are one of two types, the first being empty vessels and the second people that know what they are talking about, and really get into it.

Luckily you fall into the second camp, that has just answered my question and more Sean, so now i understand what i needed to (thanks) and even though we have terms at the bottom of our standard invoices there is nothing on the web site in 'Plain Site' you have just given me a well deserved kick up the rump, will need to get some T's & C's up on there!

Thank you!

seanstevens wrote:

Kip FX Design wrote:Sean, just thought of something I would never have thought of had I not read that, if we need customers to pay at lets say 14-30 days from invoice, for our cash flow (which we do at the outside) and they have terms of lets say 90 (this has not happened yet) then do they have to state up front?

Must confess the Mrs understands all this a lot better than me, but still I think I need to know.

There are no legal rules that say that they have to inform you of 'their' terms up front. However, many larger companies will have terms & conditions that are 30 pages long and in one small corner somewhere it will say that their terms are 90 days and you then get into an arguement. Another thing I have seen on many occassions is that they will have their T&C's on the back of their purchase order and they will send it to you via email or fax!! and post an original, you don't see these until it is too late.

Always have 'your' terms everywhere. When you send a quote have them stated. When you send an invoice have them stated. If you notice their terms on anything go back to them and say that 'your' terms overried theirs as they accepted your quote.

It is becoming increasingly popular for companies to only pay at month end. Never accept these terms (unless from a business point of view you cannot turn it down), companies that only pay at month end always pay late (my personal experience from the collections industry) and they only make a limited number of payment runs in a month this gives them the easy chance to delay for up to a month. Most people are happy to get paid in the same month the invoice is due and this is where month end due dates are deceptive as the customer can take a full 30 days extra and in the collectors mind it is job done.

I tend to waffle when talking about these kind of things, so hope I've given you a response you can understand..

Hi Sean

I work for a large company and our payment terms are 90 days end of month and I agree most are always paid over this, we do however for new suppliers ask our buyers to always send out New Vendor Forms which the company has to sign to our terms before we will buy from them, if they don't agree to our terms we then depending on each case will reduce our terms to 30 or 60 days end of month. We do have a few companies that are less than this due to their size.

I agree that you need to find out the terms of payment upfront to save a lot of hassle in the future.

Kerri

I have a question on this subject,

Say your "big" 90 day payment client has requsted you sign to there terms etc, do your terms just get thrown out, as I state 30 days from date of invoice or payment with order and for established customers 30 days delayed payment.

Surely if you have your own terms laid out stating payment within 30 days from date of invoice the customer has to adhere to these Terms & Conditions as well, yes?

s.willett wrote:I have a question on this subject,

Say your "big" 90 day payment client has requsted you sign to there terms etc, do your terms just get thrown out, as I state 30 days from date of invoice or payment with order and for established customers 30 days delayed payment.

Surely if you have your own terms laid out stating payment within 30 days from date of invoice the customer has to adhere to these Terms & Conditions as well, yes?

You would have to watch when everything is signed and some of the bigger firms can be very sneaky. I have seen occassions in the past where terms have been signed and then a bigger company has come back saying "to be able to raise a purchase order we need you to sign our T&C's". You sign theirs at a later date than they have signed yours and usually they will have a small clause saying that theirs override yours!!@@#!

In my day job (Credit Manager for a US software company) I always reject signing customers T&C's and often give them a call to tell them that I will only sign if certain sections are removed or amended and get them to send something writing to confirm our payment terms override theirs.

Sounds very much like one large grey area!

s.willett wrote:Sounds very much like one large grey area!

You got it ;)

Treat payment terms & T&C's like you would signing for a loan or mortgage - check and then check again.

Just to give you an idea of the differences elsewhere: In France a new law came in the end of last year (forget the exact month) basically saying that the maximum payment terms that one company (between 2 French companies) could take from another was either 60 days, 45 day EOM or EOM + 45. As always there are some exceptions, but it gives you the right to automatically say no.

One of the trainers on a business link course came up against this 90 day rule when he was a consultant. He got round it by factoring an increase in his fee. The company were aware of this but still happy to use him as the 90 day rule was an accounts rule and they were sales. It can be done.