The 12 Debtors Before Christmas (and how to manage them)

The 12 Debtors Before Christmas (and how to manage them)

That’s right – 2 weeks left until most of us break for a few weeks! This is not the time to put your feet up though – many of our SmartFee firms know this, and are already chasing down every outstanding invoice BEFORE they break. It’s a great strategy and one that pays significant dividends for you and your clients (remember that outstanding debtors don’t engage their advisor when they should). Cash flow certainty in Q1 next year will be critical and it starts now.

With the above in mind here’s a lighthearted take on a Christmas theme – worth taking seriously though:

The 12 debtors before Christmas (and how to manage them)

Feel free to sing along…..

On the 12th day before Christmas my debtor said to me..

“The cheque is in the mail”

Whaaat? Mail? Cheque?…More figurative than literal these days however it’s a classic excuse and still used often – “I’ve sent the money” which translates to “I’ll buy time while you try and track down the payment I haven’t sent”. Don’t take this at all – ask for confirmation of the deposit and tell them that you’ll wait until they send it through. If they’re adamant they have sent the payment ask for an electronic transfer and advise that you will remit the funds back to them immediately if the original payment turns up.

On the 11th day before Christmas my debtor said to me..

“Can I call you back, I’m with a customer?”

“No, let’s talk now”…There’s a fair chance you won’t get a call. Any contact on the phone is an opportunity to initiate action immediately – just be prepared – have a copy of the invoice at hand as well as all your payment options. The conversation could go along the lines of “I know you’re busy, we all are at this time of the year. I’m calling about your outstanding invoice and we’d like to get that settled today – would you like to service your customer first and I’ll wait or are you happy to complete the payment now – it will only take a minute”. No matter what the comment that comes next, stay vigilant and stay on the phone until you have received payment”.

On the 10th day before Christmas my debtor said to me..

“We never received the invoice”

Really? Guess it’s in your spam folder with all the other pieces of correspondences from me that you ignore….Though this is possible, it’s HIGHLY UNLIKELY – the best response in this situation is to send them a copy of the invoice immediately and wait on the phone until they confirm that they have received it. “Now you have the invoice we need to have this settled today, how would you like to pay?” If they offer to remit the funds to your bank account wait on the phone and have them forward a confirmation to you before you close the call.

On the 9th day before Christmas my debtor said to me..

“We have a cash flow issue”

This is exactly why you need to pay us – so we can help you!….The issue for you here is, if there is a cash flow issue right now, it’s likely to be even more challenging in the new year so you need to get on top of this immediately. Be firm that you cannot defer the full payment however may be able to set up an instalment arrangement. For this debtor we recommend that you get the Partner involved immediately to discuss options. One approach is to advise the client that you are keen to assist and will have the partner call them today to discuss. If there’s a genuine issue they will be delighted that you are trying to assist, if the issue isn’t as dire as that are likely to offer to pay.

On the 8th day before Christmas my debtor said to me..

“The invoice must be on my desk and I’m out right now”

No worries, we’re a modern firm and you can pay right from that phone thing in your hand….maybe not quite like this, however this one’s pretty simple – “that’s no problem, I’ll send you a copy of the invoice right now and you can check it on your phone. I’m happy to wait while you do that and then we can arrange payment right now either direct to our bank account on by credit card”. Some firms provide a direct link to their invoice so their clients can pay immediately as well. SmartFee can provide you with a secure online payment portal for free! (merchant/processing fees will still apply)

On the 7th day before Christmas my debtor said to me..

“We have the money but we have another problem”

OK – so the problem isn’t that you don’t want to pay us right now?…Unfortunately, business success isn’t a given. Take a breath and ask for the specifics – what’s going on? It’s important to understand if this is a tactic to make you go away or if there is a genuine problem – the conversation will also help determine where you sit in the line of payment priority. Get as much info as you can and close out the call by advising them that you will have the partner call them. Any situation like this requires attention from the right person – either to discuss collection/payment options or to provide support / advice on the next steps for the business. If the problem is that they can’t pay, you should consider handing off to a collection agency immediately.

On the 6th day before Christmas my debtor said to me..

“I don’t agree with your invoice”

so please tell us so we can sort it out….While there are often legitimate disputes on the itemised services on an invoice or the difference between a fixed price agreement and the additional services this can often be a delay tactic. This response is one you want to take seriously and action immediately. If there’s a genuine mistake, in the interests of customer service, you want to resolve it quickly; if it’s a delay tactic, you want to get past the excuses and straight to payment. Make sure you have access to a copy of their agreement/engagement letter and email that to them immediately. At the same time explain to them the dispute management process and commit to a follow-up within 24 hours. It’s worth locking again a time for the call so that you have their commitment to the process as well.

On the 5th day before Christmas my debtor said to me..

“We just don’t have the money”

“Oh no, that’s terrible”…like our debtor on the 9th day, the key challenge here is to work out if this is a delay tactic or a real problem. Sometimes a large lump sum payment is too much to manage so it’s important to understand if they WON’T have the money or if it’s a cash flow issue. SmartFee may be a great option here to help your client align payment of your fees to their cash flow. If the answer is that they CAN’T pay, we suggest you advise the client that unfortunately you have no option but to commence legal action for payment and hand collection over to your collection agency. If it’s a delay tactic you’ll likely get some reaction. If they have a genuine problem you’ll need to be moving quickly to have any hope of recovery.

On the 4th day before Christmas my debtor said to me..

“We pay net 60 days”

Ok, that’s a new one…. This sometimes comes up from a company that is well practiced in delaying their payables. They’ll claim some corporate policy to wait a certain length of time before making a payment. This is part of being prepared before you start making calls – do they always pay within the terms stated by them? Has their specific arrangement been documented? Ignorance can help as well – “I wasn’t aware that we made special arrangements for our clients. Our standard terms are 14 days and you are now X days overdue. Can you confirm if you are able to make payment today?” If they stick to their guns its worth advising them that you’ll speak to the partner and have them confirm the arrangement. Sometimes this can be enough to get some action.

On the 3rd day before Christmas my debtor said to me

“It’s with my wife/husband/business partner etc., they pay the bills”

So it’s not your problem, excellent, let’s get paid then….as is often the case for many SMEs, one partner delivers the business product, the other runs the business operations. Assuming this is not just another excuse, (and to make sure it’s not) a good tactic here is to say, “that’s great, I’m sure she/he’s just missed it – can you get them on the phone now and we can arrange payment?” You’re more than likely going to be hit with “They’re busy / they’re out” etc. so worst case scenario, ask for their mobile number so you can follow them up with a text (NOTE: Text messages are one of the most effective tools to communicate).

On the 2nd day before Christmas my debtor said to me..

“I’m waiting for a big customer to pay me”

So am I and it’s you!…This one’s a bit like the debtor from day 9. It’s a cash flow excuse framed differently. Apply the same approach – yes, there’s slow payers that create problems – worst case you should get some money today and agree a short term plan.

On the last day before Christmas my debtor said to me

“Can I pay in instalments?”

YES you can and we have a solution for you….Did I mention SmartFee? We exist to ensure SMEs can access the right advice at the right time by making it easy for them to pay their professional fees in line with their own cash flow situation. SmartFee is a great solution to help get you clients and your firm on track before the January cash flow crunch. We recommend making SmartFee a standard offer to all debtors right now – Offering your clients no option but to pay will close out the excuse. What’s more you’ll be surprised at how many of your client will pay in full once they realise they have an instalment option available.