Business reveals all aspects of human nature and most of it is unpleasant. This may sound harsh but the first thing you learn in business is that you can’t trust people. They will not do what they say, pay when they are supposed to and when confronted about it will turn defensive and avoid you. So in effect not only are you out of pocket but you have lost a customer too. I have learned some expensive lessons during the course of the last ten years as an entrepreneur. By implementing a few basics you can avoid paying expensive school fees too.
1.) Make sure that all undertakings by both parties are clearly spelt out in a written agreement. It does not have to be a 20 page legal document but it should clearly spell out each parties role and the costs involved. The fact that a verbal agreement is binding is not worth the paper it isn’t written on. If you don’t have a written agreement you are setting yourself up for an expensive lesson in legal procedures.

2.) Whenever possible get payment first before providing the goods or services. This may sound more difficult than it is to implement. A simple phrase like:“ I will send you the invoice and as soon as I receive proof of payment we can proceed “ Will save you hours of time on the phone and legal fees pursuing payments. A retail outlet never lets you have goods without payment, a mechanic won’t let you have your car until you have paid, so why should you provide goods or services without receiving payment. It is not always possible to implement this with bigger corporations but they will often pay a large deposit without qualm.

3) Make sure the client understands the nature of your services and the limitations. The client may assume you are including certain services when in fact they are optional and on a pay for basis.

4) Things go wrong. Plan for it and spell out clearly what the penalties are should deadlines not be met.

5) Don’t do additional work unless you are being paid for it. Freebies set you up for a cycle of abuse. If the client wants x additional, immediately tell him what the cost implications will be.

6) Do not continue supplying services or goods to a client that is behind on payments. Contact the client, tell them you will be happy to provide the goods or services once the outstanding payment is made. It is the old adage of throwing good money after bad.

7) Leopards don’t change their spots. Don’t take chances on people with bad payment reputations.

Whenever I ignore the above I am inevitably disappointed and out of pocket. When I do implement I find the whole process runs smoothly and the client and I am happy. It is a jungle out there for small businesses and cash flow is the major reason for small businesses failing. I hope these few pointers can make a difference in your business.

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This entry was posted on Tuesday, November 20th, 2007 at 11:39 am and is filed under Marketing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.