Good cop, bad cop

Peter Savage looks at the tricky subject of asking customers to honour their commitments and, possibly, debts – without ruining your customer-supplier relationship or losing what you are owed.
How do you keep your customer sweet whilst making sure they pay?
This is a question that I have been asked numerous times over the last few months, as dragging in money becomes ever more difficult and work ever more scarce. You don’t want to turn away work; but you don’t want to work without being paid. It’s a conundrum that crops up even in good times, though usually in different circumstances. It is particularly tricky in a financial downturn.
As I go through what I recommend, I will assume that there are at least two people in the business. But the rules apply just as much to sole traders, husband and wife companies, and in businesses run by partners.
Rule No 1
Ensure that the customer knows your terms of trade before you start the work. It is amazing how many people begin working for someone without ever confirming how much they are going to be paid let alone when they will be paid.
So, take a leaf out of solicitors’ and accountants’ books: they always sign a terms of trade letter before doing any work – and it should be the same for you. You believe you offer a professional service so act as the professionals do: ask your customer to agree, in writing, to your terms and conditions. If they ask why, say that is the way that we in our industry work. It also allows you to negotiate your terms and it will iron out any misunderstandings, before they occur.
It might seem bureaucratic and time-costly but, once you’ve drawn up your basic terms and conditions letter, all you need to do is adjust it for each customer – which takes minutes and may well save you time, money and aggro in the future.
Rule No 2
Invoice on time and regularly. One of the most common mistakes businesses, of whatever size, make is to assume that the client’s clock runs at the same time and charge out rate as theirs. How many times have you quibbled a black cab’s fare because you can see the charge on the meter in front of your eyes? Yet, in our types of businesses, most conflicts happen when you jump in the equivalent of an unlicensed cab and, once at your destination, find you’ve been hit by a much larger bill than anticipated.
So, have a routine for invoicing: it is easiest for many businesses to produce all their invoices at the same time (at the end of each month, say) while others start invoicing immediately after packing up their kit when the job’s done. Whatever is your preferred routine, stick to it – so you always invoice on time. And if it is likely to be a long job, include a provision in your terms and conditions (see Rule No 1) for invoicing for interim work, such as in regular progress payments or as you reach particular milestones within a job.
Rule No 3
Confirm with the customer, at the end of the job, that all is finished to their satisfaction. This might just mean sending an email; others might prefer to send a letter, but you should produce something along the lines of “I have finished x and y as agreed and I am sending in an invoice for £z. Is that ok?”. Hopefully they will say yes but, even if they don’t respond, at least you have conveyed a message saying this is how much you owe me and I am sending an invoice which I expect to be paid.
Rule No 4
This is where the bad cop comes in. All the above is good practice that all businesses, whatever industry they are in, should follow. What happens if the cheque does not come rolling in? Rule no 4 is the trick.
Ask your partner, another colleague or the accounts department to chase the debt. Why? Because this disassociates you from enforcing your rule No 1, helping you maintain your customer-supplier relationship. If you have adhered to all three rules, the client should have no reason not to pay but, as you will invariably want more work from them, having someone else chase leaves you in a stronger position. This gives you the ability to keep talking about the nice parts of life – creativity or whatever – and your bad kop can get on with the mucky existence of chasing that elusive cheque that’s always in the post
Good luck – because you’ll need some luck when chasing debt. Just remember that the amount of luck you’ll need can be reduced by following good practice.
If you would like to comment on this article, or any in the series on running a broadcast business, write to peter.savage@azule.co.uk or contribute to the blog at www.azule.co.uk/articles.asp where you can also read previous articles on financial issues that affect your business.