Why you need a Collections Process

The other day, I was telling a client how important it is to have processes and procedures in place that act as checks and balances for your business, without you even thinking about it.

For example, I said, I regularly help businesses create and implement collections processes that define the steps they take to receive payment for the work they do.

“Not a problem!” my client assured me. “I’ve never had a problem getting paid.” In fact, she replied, her clients always pay in full up front.

“That’s great,” I responded. “But where is that written down? Are your expectations for clients clearly stated in your contract, and what commitments do you make to them in return? What happens if they don’t pay you up front? Do you follow-up with them? And if you do, when do you do it? Do you still start work on their project, or warn them you can’t begin until they make that first payment?”

She looked thoughtful. “I have no idea.”

She’s not alone. Unless you have your processes written down, it will be difficult to replicate them perfectly every time which leaves you open to potential problems down the line and makes it difficult to automate or delegate the work around getting paid.

Here are 4 reasons you need a collections process:

Potential for confusion and misunderstanding is reduced or eliminated

The point of having a definitive collections process is so that everyone knows what’s expected, what follow up actions will be taken on your end, who will take them, and when.

If you have an informal “unwritten” policy you expect everyone to follow, write it down.

Unwritten policies and procedures become problematic as you take on more clients and hire more employees, team members and subcontractors. Paperwork and information can get lost in the shuffle, and you want one dedicated point of contact for your client in regards to payment, always providing timely, accurate and complete information.

Also, you’ll save valuable time, energy and frustration by implementing a step-by-step process that works the same, every time. When your policy is written down, shared and followed to the letter, you don’t have to remember to send out that invoice, anxiously await a cheque in your mailbox or wonder if you need to have an awkward conversation with your client because neither of you remember when they were supposed to pay that deposit, and how.

You need everyone to understand your policies and how they’re enforced

Every collections process needs to answer the 5Ws, but also get into explicit details about how you receive payment.

Specifically state:

• How far in advance of the project’s start date your clients should pay you

• If you’re not paid on time, when does it begin to affect the project start date?

• Which invoicing software do you use (FreshBooks, QuickBooks Online, Wave, etc.)

• How should your clients pay you (cheque, e-transfer, Stripe, etc.)?

• What’s your process for following up if and when payment is late? When do these actions take place, and which of your team members is responsible for these tasks?

• What happens if clients continue to pay late, or don’t pay at all?

Once you’ve created your policy and distributed it to those who need it, review it with them. Ensure everyone understands and follows it, because the health of your business depends on your ability to rely on revenue coming in.

You’ll appear more professional to your clients

Client experience and customer service are everything, and implementing clear processes and procedures should be part of the foundation you build your business on.

You want your clients to have a great experience with you, rave about you to their contacts and refer all their contacts to you.

How will you get that all-important endorsement if you don’t conduct business in a way that makes your client feel secure, respected and wholeheartedly confident in your abilities?

You can customize your policy based on your business model and client’s requirements

Create a collections process based on your business model – do you run a project-based business, or are most of your clients on retainer? Your answer will determine everything from the amount you invoice to whether you’re paid in one lump sum or installments.

When you have a basic collections process, you can work with your client to ensure the timeline, amount and frequency of payments make sense for both of you.

Want to know more about what you can do to ensure you get paid on time?

Fill in the form above to get the full collection of Kick A$$ Tips to keep your cash flow flowing. The pack includes:

• Sample collections processes

• Sample wording to include in your contracts

• Copy-and-paste email scripts to use at every point of your collections process

• Invoice template

• Statement template

• Tips about popular invoicing platforms such as FreshBooks, QuickBooks Online and Wave

• Key actions you can take before, during, and after invoicing to ensure you’re paid on time, every time.

Any Old Task can help you create a collections process or other policy to improve your productivity, efficiency and effectiveness!

Get in touch with us at info@anyoldtask.ca.