I often get asked how do you go about entering a new business relationship with a client in a service driven company. How do you know they will be a good client? How do you know they will pay you? How do you know you will be able to meet their expectations? And what if it all fails???
Well with relation to my business I have the ability to vet all clients before taking them on. You may be thinking “I won’t be able to do this in my business,” but there is always ways to vet your clients.
So how do you vet a client?
Firstly you need to decide upon the type of demographic or type of client you wish to be adding to your business. Are you looking for small local companies? Individuals? Larger companies? You need to know your market.
Next you need to engage with your potential new client to establish if their requirements will be met if you take them on. This can be through a phone call, a meeting or even a series of emails. I recommend face to face where ever possible, if not the next best thing is to get as much information via email and then to call to discuss afterwards.
Finally, find out why they are looking to gauge your services and why they left their previously provider or why they are looking at these services as long term. I have used this time to contact other businesses who they have relationships with to find out more about them and what they are like as a client prior to taking them on. Speaking to other companies can be extremely helpful and give you great understanding on how their other business relationships work. However, make sure you new client knows you will be speaking to other companies that they deal with in case your engagement is confidential.
How do I make sure I get paid?
Ok so the above all comes back positively and they seem like the perfect fit for a new relationship, but what about payment? How will you know they will pay? First, do an ASIC search and check their company is not under liquidation. Secondly, a quick google search will normally indicate if there are any other issues with a company. You can also look to do a trade reference request with other businesses who extend credit to the company. Finally make sure there is a formal agreement (this is always best obtained through legal professionals) or at the very least an email that both parties have agreed to stating payment terms, this will be become important if they don’t pay when they should. After this only extend credit on a smaller time period to establish a payment relationship. After a while this can be changed and extended if needed. If a company is serious about using your services they will accept any reasonable payment terms you set.
What do you do if they don’t pay?
This is often where small businesses fall over as they don’t have the time to spend chasing payments. But, having the right structure in place can help.
First, send a payment reminder by email when overdue.
Secondly, give them a reasonable time to response, if no response call them to discuss.
This is usually when people will pay.
If after this point they still haven’t paid try to call and / or email to organise a payment arrangement. If you can get some money it’s better then no money.
If they don’t abide by the payment plan and/or you can’t get them to make payment you then need to take things further:
Send a letter of demand advising that if payment is not received by a certain date you will be taking the matter further.
Contact a debt collector (yes you may loose out on some funds) but these guys are experts at getting valid payment for outstanding accounts. Always use a reputable option.
Alternatively you can look to undertake the debt collection services your self and then organise to take it further through court to recoup your money if need be.
At the end of the day there will be a time in every business where a customer can’t pay on time or at all. The way you deal and discuss this with your customer will ultimately decided whether you receive any funds at all. Having well maintained relationships and open and frank discussions during the collection process will help you get the funds you require.
Disclaimer:
Please note the above advice is general in nature and may not apply to your situation. It is based on my own experience only, I have had success utilising these options. However, it may not be successful for you. Platinum Business is not liable for any outcomes due to the advice listed in this blog. It is recommended a professional is always obtained should be required. Please note Platinum Business is a Registered BAS Agent however the release of the blog does not provide a Client / Representative Relationship