Here is my fourth blog post covering the subject of getting paid by your customers. For these blog posts I have taken some ideas from the article, “How to Collect from Anyone (Even Enron)” found in Inc. Magazine.
Way to get paid #4: Do the Math for Your Customer. I am sure that we have all seen a bill from a vendor that specifies late fees. Generally, somewhere on the bill is a statement like this, “if not paid within 30 days this debt will incur late charges bearing interest at the rate of one and one-half percent (1.5%) per month”. The legal lingo may even go on to state, “should this debt be placed in the hands of an attorney for collection, debtor shall pay attorney fees in the amount of twenty-five percent (25%) of the amount due.” The first time that I saw this on a bill – way back when – it caught my attention so I read it quite carefully. Nowadays, I skip over that part and if you have handled at lot of bills from vendors, you do too. Very likely, your lawyer insists on having this language included with every invoice that you send. However, what does this really mean to your customer? Let me suggest something that I believe will mean much more to your customer and get better results.
Spell it out for the customer. If for example, the invoice is for $5,000 state this on the invoice. “Amount due if paid by August 31 is $6,000.00. Amount due after August 31 is $6,090.00.” You may have noticed that your monthly home mortgage statement has something like this. Specifying the dollar amount of interest as compared to merely stating 1.5% can make a big difference in how promptly a customer pays.
“Engage people with what they are able to understand; it settles them into a predictable pattern of response.”– from The Art of War by Sun Tzu.