Dead accounts receivable were covered in my column last week, but I have some additional comments that go beyond just managing their collection.
Delaying a payment or not paying an invoice and letting amounts pile up are a way for a client to give voice to a problem with your services without causing an immediate confrontation.
There are two specific situations I want to cover here. They are with clients who slow up payments and clients who withhold payment. Both of these require giving attention to your receivables and your accounting business. If you set up your clients for automatic monthly payments, this would not apply and you would need to uncover discontent in other ways; and this column would exclude these clients.
I always prefer to deal with unpleasantness quickly and not let it linger. It also reduces my stress level. If a client complains, or if we’ve made an error, or otherwise do not perform at the high standards we should and that the client has become used to and expects, I would rather deal with it head on. A dissatisfied client’s dissatisfaction does not go away. It remains, lingers and festers, and the disappointment and anger grow. To maintain a healthy relationship, you need to confront it as quickly as possible.
Finding out about mistakes is not always easy since a client might not wish to bring it to your attention waiting for you to bring it up. I have found two stealth ways clients use to express discontent. One way is to slow up payments. This might not always be evident, especially if a client’s payment is not late. Let me explain. Suppose you have a client that usually pays your invoice by return mail. In those cases they receive the invoice on the 5th of the month and write the check, and you have it by the 9th. That’s a good client and should be given added attention, assuming that is possible. Now assume the payments start to come in around the 25th of the month. Still not late, but a change in the pattern of payments. Usually this would not be a cause for alarm since the payments would still not show up on the past due list. However there was a change in that pattern, and something precipitated that change. Letting it slide one month might not cause alarm, but the second month should generate some concern and perhaps a call to the client to see if everything is all right.
Before I make that call, I would check with the people working on that client to determine if anything out of the ordinary occurred from our standpoint or with the client’s business. You might find out that there was a small penalty notice that was poo-pooed, or that the client’s largest customer is experiencing financial difficulties and has delayed payments to them. One of these, or many other situations, are something that you, as the client’s trusted advisor, should be aware of and should discuss with the client. A small tax penalty is usually not meaningful financially, but it is an indication that something might have been done wrong by us. These must be dealt with quickly, and in the utmost serious manner.
Once I had whatever information I could gather, I would call the client and ask if anything is on his or her mind and if there’s anything I could do. And then I would let them talk.
A client holding back payment is another, but similar, way to indicate dissatisfaction. Approach this the same way. Perhaps also wait for the second month the check wasn’t received. You should not delay making that call since our fees are never that meaningful to a client’s operations but accumulated unpaid fees can become somewhat meaningful and those balances will create a cash flow problem for you. Deal with it promptly. [I usually would call on the first day of the next month.]
Waiting for monthly accounts receivable schedules is a regular ritual for most businesses, but managing the client relationships should not depend on internally generated reports, but on regular oversight of what is happening and changes in patterns, and particularly payment patterns, by clients.
It’s your business. Act like it!
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