Chasing Ghosts (Part 1)
Do you chase ghosts? I bet you have, at some point!
I’m not talking about the free-floating spectral spirits found in Ghostbusters.
Although, it can be a haunting experience non-the-less.
What I’m referring to… and you’ve most likely experienced this…
is the fluttering sound of time, energy and resources being wasted trying to collect money owed from deadbeats (or ghosts as I like to call them).
My printer likes to advance credit to everyone, but has a tough time collecting. Although most of her clients do eventually pay…she has a few that continue to hide in the shadows and withhold payment.
She asked for my help. She informed me that she has been trying to collect a total of $1000 from 3 customers. The lowest amount was $56. The next 2 amounts were $378 and $566.
As much as I wanted to tell her she was on the right track, I just could not! She was indeed chasing ghosts. She was wasting time, energy and resources trying to collect monies she would never see. She was stressing out! Plus, the time spent trying to collect could have been put into newer sales.
I explained to her the chances of ever seeing that money diminish with each passing day. That, and to keep spending money to mail out past due invoices was costing her way more than what she would end up collecting.
“Ten bucks”, I told her! That was the amount per week of the uncollectibles divided over 2 years. It just wasn’t worth worrying about! Heck, it’s the cost of 2 Starbucks coffees.
“But, it’s a thousand dollars”, she snapped back.
“No, it’s not!” – it’s a ghost and you need to stop chasing it.
After our conversation she immediately changed her way of doing business. She now requires payment at time of service. No more billing! No more hassles! No more wasted energy spent collecting! Best of all, no more chasing ghosts!
When you don’t collect at time of service, you allow the customer to call the shots and take advantage of you.
Hi, I’m Rob Anspach, and I wrote this “Chasing Ghost” short six years ago (Feb 2010) for my blog at the time. Occasionally I go back and reread what I wrote to see if it has relevance in today’s entrepreneurial world, and if so, I share it again. Ironically, that printer I spoke about 6 years ago went back to her old ways of “chasing ghosts” because she allowed her customers to dictate their terms and conditions and sadly went out of business.
Well, here’s the follow up article…
Terms & Conditions (Part 2)
Yesterday’s post titled “Chasing Ghosts!” really got some people fired up!
I received several emails saying, we just can’t do business that way, or this is the way we have always conducted business.
If you didn’t read the post…
I will sum it all up in a very brief paragraph. Chasing ghosts was I term I coined for deadbeat customers who refuse pay. You waste so much time, energy, resources and your own money tracking these non-paying delinquents… it’s as if you’re chasing a ghost.
I had some say…
“ Well, we’ll place a mechanics lien on their property if they don’t pay in so much time!”
In most cities, you can’t file a mechanics lien until after 90 days, sometimes more… by that time, the customer could have sold the property, skip town or filed bankruptcy. The money you spent on filing a lien is now money lost in the pursuit of a ghost. Sure, a mechanics lien sounds wonderful…but, what if the sleazy non-paying customer never sells the property? Guess what… you don’t get paid.
“ Well, if they don’t pay right away, we’ll charge interest”.
Good luck with that! If you haven’t been able to collect in 90 days, the chance of receiving interest on the outstanding debt is slim to none.
“ Our margins are too low, we can’t afford to pay the fee to accept credit cards or commercial lending!”
Well, if your margins are too low, maybe you shouldn’t be in business.
Look, this isn’t the 1960’s where deals were made on handshakes, and people trusted each other. You just can’t afford to do business that way. You are in business to make money… plain and simple. You’re not a bank! You’re not a charity! You need to be paid! The only way to insure that payment is forth coming every time…is by informing your customer up front what your terms and conditions are.
Just because you have always extended credit before, doesn’t mean you have to continue to do so. When you allow the customer to dictate terms, you give them permission to rip you off.
Your terms and conditions can be whatever you wish! If a customer truly wants to use your service, they will honor your terms and conditions. Will you get every job…NO! Will you eliminate 99% of your collection headaches…YES!
Why complicate your business with collections? Make getting paid a priority!
Don’t overly complicate your terms and conditions. Keep them simple! Above all, make sure payment for services is clearly spelled out. And most of all…stop chasing ghosts!