Rethinking Collection Policies in the New Year

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It’s that time of year again…clients are calling, employees are gearing up for long days, CPE galore! So…after you put in all of those longs hours, rush to make deadlines so your clients are happy – when do you get paid? Are you going to work all of these long hours coming up, without knowing that? Do you have a collection policy in place? Or is your collection policy to work tirelessly and not get paid for 6-12 months after your work gets done, and not get paid by some clients ever? 

Now is the time to take a hard look at how you collect from your clients – BEFORE you start the work. We are very smart people with what we do on a day to day basis, in a very technical field – but when it comes to collections, we hate that topic and avoid it all costs! So, be proactive and think about options of working with your clients to be sure you are whole – and profitable – when you come out on the other side of busy season.
There are many options – but all of them include getting retainers or prepayments. I know – even scarier territory. But…it just doesn’t make sense to work so hard if we can’t get paid. So giving options to a client makes the discussion easier. 
In my experience, I gave clients 3 options – either prepay a block of time, and as it is used up, another prepayment invoice would be sent to the client before more work was completed. If a client chose this option, I provided a prepayment discount - that way they get something back for prepaying. The second option is to pay by check real time, as work is completed, and before any work is delivered to the client. The third option is keeping a credit card on file, and charging their card when work is finished. With the last 2 options, no prepayment discount was provided. But if you can tell in all the options, Accounts Receivable was not included.
My own books were obviously run on QuickBooks Accountant software – I am sure you assumed that! Intuit has a merchant account service that I used to keep credit cards on file with clients that chose that option. This made my life so much easier when this service came out. I was not only able to keep a credit card on file, if we charged a recurring monthly or quarterly fee, I could have it automatically bill the customer’s credit card too. If the customer didn’t want to provide me the credit card, and wanted to enter their own credit card information, then I could use Billing Solutions and email the invoice and have it enabled for the client to pay by credit card online and the payment synced back to my QuickBooks file. The customer payments were matched in the system to open invoices. The best part of all of it is that it gave me a new icon that let me know which credit cards batched together at my bank and when they were deposited. It is completely integrated with the QuickBooks file. So, there is no manual piece to this, it is all automated.
Now…you can even do this with checks. You can scan a check into your QuickBooks file and have it match to an open invoice. Or you can take an e-check – and enter the check information in the Receive Payments window, and that matches to the invoice. In both cases, it is direct deposited to the bank – so you never have to make a bank run.
These collection alternatives make running a business easier. It takes the whole collection conversation out of the client relationship. That way you can focus on the important things with a client that help them in their business, and not be concerned about ruining your relationship with collection calls. I can tell you from experience, that I had very few prospects ever say that this would be an issue for them. I always brought it up before we finalized an engagement letter so they understood the collection policies. For the handful that had an issue with it – I am glad we had that conversation before I had myself or any staff working hard for a client that was going to be a collection problem!
Food for thought before starting engagements this busy season – try it out with some new clients and see how it goes. I think you will find that you will soon be converting the rest of your client base to this policy as well…Happy New Year!
 

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