Subscribe
Share
Share
Embed
Business BeyonDIY is the go-to podcast for small business owners and entrepreneurs looking to take control of their success.
Hosted by seasoned business veteran Steve Krausse, this show is all about making practical, actionable, and sustainable changes—whether you DIY them yourself or DIWH (Do It With Help).
Each episode is packed with insights to help you boost your happiness, impact, profit, and company value. Whether you're a solopreneur or leading a growing team, Business BeyonDIY gives you the tools to make smart decisions and get the most out of your entrepreneurial journey.
Subscribe now, let's roll up our sleeves and get to work!
BBDIY 010 Podcast Episode
===
[00:00:00]
Introduction and Host Welcome
---
Steve Krausse: I get it, but it's weird though, right? I mean, they owe you money, but you're the one that feels uncomfortable. No wonder we don't want to pick up the phone and make that call today. We're going to make getting paid objective and streamlined high business owners and entrepreneurs. Thank you for being the backbone of the economy and welcome to business beyond DIY.
I'm your host, Steve Krausse, a passionate small business veteran of over 30 years. I help owners like you DIY what makes sense or when needed, DIWH do it with help to make practical, actionable, sustainable changes to your business so that you can increase your happiness, impact. Profit and company value.
Business Beyond DIY will help you get the most out of your entrepreneurial journey, whether you're a one person show or a 50 member ensemble. If you're a regular listener, thank you for that. [00:01:00] If you're new to the show and the content sounds valuable, consider subscribing so you'll never miss an episode.
Now, let's roll up our sleeves and get to work.
The Importance of Getting Paid
---
Steve Krausse: Okay, first things first, you deserve to get paid for your time, knowledge, and product. If someone agrees to purchase it, and you can deliver it, then you get paid. That's the deal.
Four Actions to Streamline Payments
---
Steve Krausse: Today we're going to talk about four actions you can take to make getting paid streamlined and objective.
The first thing we can do is get paid in advance. You don't have to collect money that you already have. The second thing we're going to look at is making our payment terms clear. The third thing we're going to talk about is making it easy to get paid. And then finally we're going to talk about controlling the credit that we give to our customers.
Getting Paid in Advance
---
Steve Krausse: The first thing I mentioned is getting paid in advance. Retail, fast food, [00:02:00] They expect to get paid in advance and we're used to it, right? Services like hair salons and auto repair, they expect money immediately upon completion of the service and we're used to it. But we know that different industries have different expectations.
And if you're in an industry where customers expect to pay later, you still have some options that I want to talk about. The first and probably the most obvious option that we want to talk about is a customer benefit of some kind. And the low hanging fruit is a percentage off of the balance. If you want to do that, you offer your client a credit.
We don't offer a discount. We offer a credit for cash received at the time of service. This may sound like semantics to you and I want you [00:03:00] to think about it this way. If you give your customer a discount, a discount is a devaluation of whatever you did or sold for that customer. Whereas a credit is the offer of cash equivalent to the value of having been paid in advance.
And it may seem like semantics, but in your customer's mind it's not. And we don't want to ever devalue the product or service that we offer to our marketplace. So, another thing we can do is have an add on or a nicety, something that we can offer For customers who pay up front a low cost bonus with real and perceived value to our customers.
Something that says or that we offer that if they [00:04:00] pay at the time of service or in advance, they get this bonus that they would not have gotten otherwise. Another option for us to incentivize being paid in advance is that that payment will reserve time in our schedule, a specific time of service that may have some priority over clients who don't pay in advance.
And then finally, there's this convenience issue. Once you're paid, nobody has to worry about it anymore. And the faster that's done, not only is it convenient because we don't have to think about it anymore, but it is also economical. Because every interaction around payment costs both of you money. It costs you money as the provider and it costs the customer money.
So getting paid quickly is more efficient for both of you.
Clear Payment Terms
---
Steve Krausse: The next thing we want to talk about is having [00:05:00] clear terms. Terms are the conditions under which we expect to do business. And it's important to make our expectations clear up front. We don't want to ever rely on assumptions or memory. We don't want to assume that our customer knows when they need to pay us.
And we don't want them to necessarily have to remember What we said about them paying us. So how do we deal with that? Well, the first thing we can do is make sure that our terms are on our website. And I'm not talking about the terms that are in a tiny little font in the footer that nobody clicks. Or something like you get with software where it downloads this huge long document that you're supposed to agree to before you use the website or the product.
Um, We're talking about bullet points in the how we do business, the working with us, the about us page of your [00:06:00] website, somewhere very obvious, not in your face, complete, and obvious, clear. We also put those terms of payment right in our proposals. We talk about them during our conversations off, not, I was going to say off handedly, not maybe not off handedly, but we casually talk about it.
We don't do it in your face again. We just want it to be something where it's clear that we covered it during our conversation. If you have to have a little script that you put so that you keep it beside your screen or or near your phone or something, that's okay. Okay. But we want to make sure that we cover certain topics when we're having that part of our conversation with our client.
We're also going to put it in our email communications. And again, this is not, um, overbearing. What it is, is thorough and clear [00:07:00] and concise. So that there's no vagueness, no ambiguity about when we're, we're expecting to get paid and when. Your customer can't expect to pay us. Let's talk a little bit about payment deadlines.
If you're going to send an invoice, so you're not being paid at the time of service and you're not being paid in advance, we want those deadlines to be short. We don't want momentum to begin working against us and the longer it takes a customer to pay you, the more momentum is working against you getting paid.
So we want those to be short.
Consequences of Late Payments
---
Steve Krausse: Next, we're going to be and end up in the world of talking about consequences. And I am not a big fan of trying to strong arm people into paying. What I am a big fan of is delivering value and having clarity up front. But sometimes you're just not going to, [00:08:00] that's just not going to be enough. All right.
So we have to talk about consequences. And the first one that a lot of people will go to is finance charges and interest. Please don't put that in your terms if you're not willing to pursue it and keep track of it.
If you're willing to do that and you think it's beneficial to you, go ahead and put it in. But what I would say is for a lot of business owners, they're very unlikely to get paid. And if you're having trouble getting a customer to pay the bill, principle of what they owe you. What do you think the odds are of getting them to pay some add on interest or finance charges?
It's just not likely to happen. And so you're going to have this tension between you and your client that continues past even getting the principle paid. So I would not [00:09:00] put in interest in finance charges unless it's really important to, uh, It to you or and you know you can deal with it or if it's an industry standard for the marketplace that you're serving, then maybe you can put it in again if you're willing to implement it, track it and pursue it throughout your business, you know, all the time.
What we don't want to do is put it in and then not enforce it. Because if we don't enforce a part of our terms of service or our payment terms, then what other parts can our customers simply ignore that we won't enforce? And it becomes a slippery slope to going back to not having any policy at all, which we don't want to do.
So, [00:10:00] unless you're really willing, I, I don't put in things like finance charges. The next thing we can do though, is we can withhold product or service. Mean why would we deliver for someone who isn't paying? So that's pretty easy, and it is dependent on your situation. For example, if you are a con working on a contract for a client who hasn't paid you, and the work you're doing is enabling them to build another client, so you're on the, you're in the feeding chain, but you're not first.
And you don't get paid unless they get paid, you know, if you have to finish the project before they can deliver, then you have to decide whether or not that kind of business is worth it to you. What I would suggest is if that's the kind of business you're in, where you're a subcontractor for, um, Uh, a client that is going to deliver something larger to another [00:11:00] client, and you getting paid is dependent on your customer getting paid, then I would suggest looking at milestone payments or other options like that so that you're not, so the balance of your pay, or I shouldn't say that, so the entirety Of your work is not dependent on that final payment that you are getting some kind of progress payments in the meantime.
Otherwise, you're putting a you're taking a lot of financial risk on behalf of your customer. And we don't necessarily need to do that. We may not be able to do that. So if a customer is not paying, we also have the option of collections. Right? And we don't want to do that. We feel bad sending a client to collections, which is ironic, right?
Because they're the ones who haven't paid you. You didn't do anything wrong. You delivered the [00:12:00] product or the service, and you're not getting paid, and yet, for some reason, you feel bad. But, what we can do to make this a little easier, and I'm going to talk about this a little bit more, in a moment is having a set of policies that are very clear and we stick to it.
All right, and I'll cover that in a second. The last thing I want to talk about and I, I, I want to talk briefly about it, um, is legal action because we don't want to necessarily take legal action with our customers. But sometimes, alright, I need to start that piece over.
Okay, so, la la la la la, clear terms, whatever. I don't like not being able to scroll.
Another thing that [00:13:00] people consider sometimes is legal action. And for a lot of business owners, a lot of small businesses, I think this is something we have to be very careful about. First of all, legal action can be very expensive. It's important to understand what the value of the contract is, or the value of the debt that you're owed is, versus the cost of legal action in comparison to other options, like Contacting the customer and working out a payment plan or sending it to collections and just writing off some portion of it to the collections company.
All of those things are options that we can consider. The other piece of this that we don't always think about is the public relations portion of legal action, even for small business. I know we're not going to send out a press release or something like that, but what [00:14:00] can happen And you've probably heard that a happy customer will sometimes share their experience with friends and colleagues.
But an unhappy customer is much more likely to share their experience with friends and colleagues. And a lot of small businesses run on word of mouth and local reputation. And I'm not saying we let somebody get away with not paying us, but we do have to weigh the consequences of something like legal action versus some other alternative.
So I just want to plant that seed in your mind if that comes up.
Making It Easy to Get Paid
---
Steve Krausse: Alright, the next thing we want to talk about is making it easy to get paid. I mean, it almost goes without saying, and yet it doesn't. So, how can we possibly accept payment as quickly as possible? We live in an age where we have convenience services that actually make this pretty easy, or can make it pretty easy, if we're willing to [00:15:00] do a little bit of legwork up front.
We have options to take mobile payments through mobile credit card and debit card readers, of course. But we also have options like Venmo and Zelle, where we can exchange money with very convenient, uh, applications. Now, whether or not your business is use these things may depend on the business that you're in or on your bank, but it's worth exploring because these things are very easy to use and they make, they, they reduce the obstacles to getting paid.
We also have the option for automated clearing house payments or ACH, which is a bank to bank transfer. That's very economical. This brings us to checks and cra This brings us to checks and cash. Checks are also becoming a [00:16:00] little easier to deal with now that we can do mobile deposits for small amounts and a certain number of checks depending on your bank.
For larger amounts, companies that do business to business work that might have larger balances, this may not be appropriate. And so you're still going to have to collect those checks and deposit them in the bank. Cash, of course, has to be deposited. So, if we're going to take checks in cash, it's important to have processes around that to keep them streamlined and secure, because checks don't get, checks are not money until they're in the bank.
And cash has the risk of getting lost, getting lost, or misspent because it was in the wrong place. So if we're going to accept cash and checks, we want to have a process that collects them, puts them in a specific spot that's secure and well identified for [00:17:00] processing at a very specific time. Once a week, you know, once every two weeks, whatever makes sense for your business.
But we want to make sure that process is very clear and as much as possible kind of on autopilot. So we don't have to think about it too much. And speaking of autopilot, let's talk about automated invoicing. We want to invoice in a system as soon as possible. And by system, I don't mean a notepad. I don't even mean, uh, mean, uh, an invoice book from, uh, an office supply store.
I mean a digital system where we keep our accounting. So we wanna be able to bill out of that. And if we can do it at the time and location of service, that's even better. And we're in a day and age where that should be possible. Whether you give an employee a tablet that has, uh, access. to your accounting [00:18:00] system, even if it's only for invoicing.
Or you use your phone, or when a customer calls you, you can put the invoice in immediately while you're on the phone with them. Whatever it takes, so that the system can remember the invoice and you don't have to. And when you look at the dashboard, you can see overdue invoices. Pending invoices, due invoices, all of those things are immediately available and visible to you so that you can keep track of your cash flow.
Okay.
Controlling Credit
---
Steve Krausse: Now let's talk about controlling credit. Unless you're a bank, you're not a bank. I know it sounds silly, I'm going to say it again. Unless you're a bank, you are not a bank. And if you don't get paid at the time of service or in advance, you are acting as a bank for your customers. [00:19:00] So that's important to keep in mind because we're not in the business of banking and we're acting as a bank.
So we are doing something that we are not always well equipped to take care of. Now, business to business situations often You will see something called net 30 or net 45. And what that means is that you invoice on a specific day and the balance is due 30 days later, 45 days later, even 60 days later.
I've even heard of a client of mine that had a customer that expected 120 days. Before they had to pay the bill. Now, whether or not you can accept those kinds of terms depends on your business and the strength of your cash flow. Maybe you can, but it's important to make that decision rationally [00:20:00] and, um, carefully so that you're doing it, uh, hmm.
We're going to redo business to business.
In business to business situations, you might hear something called net 30, which is simply invoicing on a specific day. And then the balance of that invoice becomes due 30 days later. Those terms can be different. For example, you can have net 45 where the balance is due 45 days later. I've even heard it go so far as 120 days.
And, why am I having so much trouble with that? I've even heard it go so far as 120 days. I want to talk about something now. If you do that, Net 30 is not a payment term. It's a credit term. Which means we are offering [00:21:00] our customer credit. You heard me right. You're offering your customer credit, which means you have become a lender.
You are now funding your customer's business. If you're willing to do that, that's fine, but run credit reports, real credit reports from agencies like Equifax or Dun Bradstreet Uh, somebody like that, uh, there's another one that I can't think of off the top of my head, but it doesn't matter. So, make sure you find a reputable credit agency and run credit reports through that agency for any customers that you want to assign a credit to.
Now, what about credit references? [00:22:00] Credit references are garbage. Unless you personally know the reference and trust them to tell you the truth. And here's why. Companies will pick their top three vendors. Or, it doesn't even have to be their top three vendors. They will pick three vendors. And they will always pay them.
And guess what? Those three vendors are going to be your credit references. So it's not necessarily indicative of how you're going to be treated as a vendor, just because those three vendors can say, yes, they pay on time. So credit references. I don't even ask for them. Whoa. I don't even ask for them because they're meaningless.
Let's talk a little bit about credit and consumer clients. So everything I just said from the net [00:23:00] 30 part down is business to business work for consumer clients. We won't offer credit. I shouldn't say that dramatically, but I don't recommend you offer credit. to consumer clients. I would recommend using a third party lender if you need to offer payment options and let that banks deal with the credit.
I know it might sound a little bit less convenient for your customer if they have to fill out this form with a third party lender. But it saves you from having to act as a bank when you're not financed, capitalized. Sufficiently to do that, it puts your business at risk so that you can save your client a little bit of convenience.
So, most of the time for most small businesses, I don't recommend offering consumer clients credit. I think it's just too much work and [00:24:00] too much risk for our cash flow. Let the banks deal with the credit.
Conclusion and Final Thoughts
---
Steve Krausse: So let's go back to one of my earlier points because I think it's really important that we remember it during this conversation. And that is that you deserve to get paid for your services and products sold. Now in the intro I said we were going to make getting paid objective and streamlined. And we did that by putting in four things.
We get paid in advance. We make our payment terms very clear from the front. We make it easy to get paid. And we control the credit we offer our customers. In the show notes below, you'll find a link to a downloadable document. To a downloadable documents. In the show notes below, you'll find a link to a downloadable document.
That is an example collection procedure. You're welcome to use it, copy it, change it, [00:25:00] make it yours, but it just provides a very structured approach to how we handle collections. So if somebody owes you money and they haven't paid by the deadline, you give them a call, send an email. If they haven't paid a certain number of days later, you do the next step.
Until finally, you simply say, if they are this late paying, it goes to collections. Or you take whatever you consider your final action, and that final action needs to be, I'm done with this. Right? I'm going to take this action, and then I'm done. Whatever that looks like. So that you can move on with your business.
Thank you for listening to this episode of Business Beyond DIY. If you're already subscribed to the show, thank you. If you're new to the show I blew it. If you found the show helpful and got value, please consider leaving a 5 star review on your favorite podcatcher, [00:26:00] and let me know. Reviews have a significant impact on making Business Beyond DIY visible to others.
Remember that doing it yourself doesn't have to mean going it alone.