Collecting the Cash is Completing the Sale

september 29th, 2012 · by John · Weblog EN

Life could be so easy! A customer places an order, we deliver the product or service and issue the invoice, and then the customer will pay the bill. All parties end up to be happy. Quoting Shakespeare, “all is well, that ends well”. Alas, in the real world it often happens that a client, or debtor as she is called by then, does not always pay in time. Sometimes she bluntly refuses to pay. In these cases, how can we get back in the “don’t worry be happy world”?

First of all we should be careful using the word debtor. The term carries a negative connotation of someone being guilty of a trespass or sin. Under ancient law debtors could pledge themselves as collateral for a loan. If they failed to pay they would become the creditor’s slave. During the middle ages, debtors were locked up until their debt was paid. Conditions included starvation and abuse from other prisoners. The client is king, and she should behave as an emperor and pay the amount she is due. Unless she has a valid reason not to pay yet, that is!

If we issue an invoice, which the customer pays too late, or doesn’t pay at all, we are entitled to take some kind of action. Calling past due invoice management debt collection can however hinder the resolution of the situation, and endanger future customer relations. Fact is that the majority of past due customers are not trying to avoid payment. They often have good, or at least acceptable reasons why they have not yet paid.

Some customers pay late because they choose to practice cash management. Big companies use their vendors as short term finance. They want cheap credit. Other companies and many government agencies, pay slowly because they are not well organized, can’t locate the invoice, or just are lazy about taking care of accounts payable. 

Other clients have not paid because something went wrong somewhere. Think of sales or service disputes, shortages or overages, late delivery, lost paperwork, missing information, unauthorized purchases, returns, misapplied credits, damage, sales guys offering extended terms and failing to tell anyone, flood, famine, fire, oil spills, and earthquakes. The underlying causes can be on the part of the customer, we can be to blame ourselves, or even come from an outside source. Indeed everything that can go wrong, will go wrong. Murphy certainly was an optimist.

Sometimes customers are willing, but not able to pay: they simply don’t have the money. This inability can be short term, and have an understandable explanation: they bill their customers at the end of the month, they have had an unexpected loss, or their business is of a seasonal nature. These customers can, more or less accurately say when they will be able to pay. Next to that, there can be long term financial problems. Possible causes are the loss of a key person, new competition, or a new product making the customer’s business obsolete. This is often the times where the bankruptcy notices will come.

When investigating past due amounts, always remember that collection is there to complete the sale. And the sales is completed when the cash is collected. Therefore, first determine why payment has not been made, and then resolve the matter so that customers will pay and purchase again.

Nevertheless, some customers will try to avoid payment. They are out to beat us out of what they owe. They will be uncooperative, they will lie, break promises or even skip out altogether. Then it is the time for real old-fashioned debt collection. Pity we can’t enslave them anymore for not paying……


John Greijmans

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