Health has become an important issue in the presidential election. Why is Trump sniffing so much? Did Clinton try to hide her pneumonia? Which candidate is healthier? How much detail do we need in the medical reports for each candidate?
It's interesting that while we focus on the physical health of others, we often ignore the health of our business in ways that can really harm us.
Recently I've been working with the Kaplan Group, the country's premiere commercial collection agency, and I've discovered that one of the most common mistakes business owners make is not thinking about how they will collect money owed, before that money is owed to them. If you're waiting until you've fired a client for not paying you to think about collecting money from that client, you may have waited too long to seek treatment. Here are steps you can take to make sure the health of your business doesn't suffer from unpaid invoices.
• Check your client's health first. Running a credit report before accepting a client's business can be a fairly low cost way to protect the financial health of your company.
• Don't wait for a check up. Before you fire a client for nonpayment, they probably already owe you several unpaid invoices. We all know that if you let a health issue slide for too long it can get worse. The same is true of unpaid invoices. When you let a company pay you late, you teach them that it's ok to pay you late. Obviously, you don't want to be rude or threaten legal action immediately, but you also don't want to get too far down the road of nonpayment. Remember, once an invoice is 90 days late there is a 26% chance that the invoice will never get paid.
• Know how to diagnose a problem. If you have a client that is suddenly late on payments and also seem to be experiencing high turnover or other changes in their business, it may be a sign that the health of their business is suffering.
• Have "health insurance." No matter how healthy you think you are, you still want to be prepared for an emergency. In the case of your business that means it's important to make sure that you have protections for nonpayment in place in your contract. In general, you will want to specify items such as interest, collection fees, and attorney fees in the case of nonpayment. You will also want to have an acceleration clause that specifies all remaining payments for the full term of the contract are immediately due in the event you terminate for nonpayment.
Whether it's health or business, no one can be prepared for every emergency. But knowing the steps you need to take to move quickly and recover any unpaid invoices can keep your business strong.
Most collection agencies only get paid if they can collect for you so if you have a late account, the sooner you turn it over to a reputable commercial collection agency the better.