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By Charles W. Kyd
Are your customers paying their bills more slowly these days? I'm starting to hear rumors of problems. The delays don't seem to be severe yet, but any slowing of collections could hurt your cash flow.
There is always the possibility, of course, that an insolvent customer won't pay you at all. But this doesn't appear to be a major problem today, and it's one that traditional credit and collection procedures have been designed to minimize. No, today's problems seem to stem from delay, not insolvency.
Companies have many reasons for delaying payment. In fact, they can generate more excuses for not paying their bills than children can for not eating their spinach. And unfortunately, these excuses can be very effective in delaying collections, because it's often difficult to know whether an excuse is real or imaginary.
One way to deal with these excuses is to declare them irrelevant: "I don't care if your entire accounts-payable department is out with the flu! We have problems, too. But we manage our problems, and we expect you to manage yours. We worked hard to ship you a high-quality product at a good price on time. But we expect to be paid for the product. And we expect to be paid now!"
This approach makes me feel good--much like clearing my sinuses does. Unfortunately, it isn't always effective. The excuse, whether real or not, often is sufficiently established in the customer's mind to postpone payment no matter how much I rant and rave. Therefore I, too, must take the excuse seriously. While doing so may not speed invoices that are currently overdue, it generally speeds collection of future invoices.
The following excuses are ones I've often heard while trying to collect receivables from business customers. Some are real problems that require real solutions. Others are outright lies. But each
excuse presents you with an opportunity to solve a problem that interferes with your being paid on time.
"Your product doesn't work." When I was the chief financial officer for a small manufacturer of numerical controls, I learned more about the quality of our product than did anyone else in the firm. If a product didn't perform as advertised, if it arrived DOA (dead on arrival), or even if it was difficult to install, I learned about it when I called to ask why the invoice wasn't being paid.
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