ShaunGish.com

Starting a company is easy. You come up with an idea or you realize that your skill set is worth something to someone other than your current employer. You hire a lawyer or do the trendy thing and go to legalzoom.com to file your papers, you put together a nifty website or blog to promote yourself, and you start getting clients…

Your typical clients range anywhere from buddies in your former industry that know what you’re capable of and want to see you succeed to some dude that ran across your site on the net and has the next big thing and he wants you to be part of it.

Some people would tell you that the latter is the biggest headache you’ll ever run into as a small business owner… they’ll promise the moon in their grandiose vision of whatever project they have in mind but they expect you to work at a discounted rate because you’ve never worked together before and besides “this is gonna be huge!”

Other people warn that the former - the friends and colleagues - are the worst thing you could possibly spend your time and effort on. Money and business have ruined plenty of friendships and (like everything else in life) you can’t really do your job if you’re trying to be friends with your client.

But - I say the actual client doesn’t matter at all.

Enter “Accounts Receivable Hell”

I’ve been lucky enough to work for a few small companies (and a few large companies) that were very successful and few that weren’t… One thing that all successful companies have in common (at least from my humble perspective) is a bulldog of an account recievable clerk - someone that will chase the mailman down and figure out that, indeed, the check is not in the mail mr. client.

One of the biggest issues that small businesses face is understanding how important cash flow is - money right now is worth a lot more than more tomorrow (or heaven forbid 30 days from now).  At my company (Figaro Interactive) we’ve moved most of our accounts to a NET 15 receivable - that’s still far too long for our liking but it’s hard to find companies willing to pay right away.

I could go on and on about how frustrating it is that a client always needs the work done right now and done the right way but they want to pay you once their client has paid them or how they feel they can brush you off and string you along until you finally send them a certified letter requesting payment…

I heard a funny stat the other day about doctor’s practices:

50-60% of a doctor’s cashflow comes from collections.

It seems logical that an emergency room’s % would be much higher.  So - Joe Patient walks in to have a tumor removed - removing the tumor today seems ideal, it gives Joe a greater chance of not having the cancer spread to other parts of his body thus upping his chances of survival.  What if the doctor said “Well… I need to get the check from your insurance company before we can do anything - that’ll probably be any day now… why don’t you go home and we’ll call you when we get it in?”

The worst part about the entire collections process with a client is that it’s the easiest way to never get another gig from said client again, especially if it’s the first project you work on with them…

But - to that I say if they’re going to be incredibly difficult to get payment from then what’s the point of doing business with them at all?  All you’ll end up doing is getting more and more jaded working on projects they send your way which will lead to less and less passion for those projects and ultimately cause you to snap and scream obscenities at your dog whose calmly sleeping under your feet… (or maybe that’s just me)

So - here’s our response to late pays… After this they receive a certified letter (with a copy of the invoice and a print out of any relevent email threads) and it’s off to collections.

Dear Mr./Mrs. JackassClientThatWon’tPay (you probably want to replace that part)

While I definitely understand the desire to receive payment from a customer before accounts payable has to cut a check, this is not the way that we operate our business and is not a business model that we can support.  We have out of pocket expenses that we must recuperate on projects and we have suffered being in the red on projects plenty of times but we understand the necessity to pay the talented people that we contract in a timely manner because they too have bills to pay.

The invoice is more than a month past due and the total is $xxx.  Please make payment within 7 days of this email.

Thank you,
Our Team

We don’t like confrontation either… but sometimes you have to set a precendent otherwise clients will take advantage of you (they aren’t your friends…).

No dogs were or ever have been harmed because of a client not paying the bills… on the contrary - the dog usually eats first when there isn’t enough money to go around