We recently started working with a new client, a law firm specialising in bad debt. Part of their service is how to avoid getting into the position of requiring their services in the first place. Much of these lessons are simply common sense but like a lot of what we do it often takes someone else to point that out before you take them onboard. We thought it worthwhile to share some of their ideas with our TAAN colleagues.
1.Don’t put ‘all your eggs in one basket’
If you’re careful not to do this then debt from one customer should not mean the collapse of your business. I’ve lost count of the times I’ve heard of an agency who simply became too reliant on one or two clients. It’s hard of course, sometimes a client grows and you grow with it, often a large client demands the best people you have, tying them up and so preventing them from working on other clients or new business. This is where directors of an agency need to step back and make the correct decisions to ensure that your agency is not at risk from that one big account.
2.Check Your Customers; Regularly
Will the customer be able to pay their bill? Carrying out credit checks is vitally important and credit limits should be set for each customer. You can purchase credit reports in most markets and many agencies do this before working with new clients. However it is remarkable how few of us get regular credit checks done on clients we are working with on an ongoing business. There’s an arrogance in that, because we are working with a company regularly we think we know how that company is fairing. However agency people are naturally optimists, positivity is part of our make-up, so maybe we aren’t always the best people to make that call.
3.Consider Different Payment Terms
Payment on delivery, staged payments, discounts for prompt payment are all options you may want to explore. Likewise consider introducing penalties to clients who make late payments, agencies are often loathe to do this for fear of losing the client however we each have a business to run and late payment can hamper that. We all will have our own credit terms, 10 days, 30 days, 60, perhaps longer is not unheard of and ultimately each individual agency works with what is best for them however flexibility on this should be considered.
4.Keep a Tab on Things
Is there a reason the customer hasn’t paid? Have you got a procedure in place for flagging up unpaid invoices? It is surprising how many agencies don’t. 30 even 60 days can pass before someone picks up a phone and asks if there is a problem with an invoice. That’s valuable time, much better to find that out as early as possible. I know of several companies who as a matter of course pick up the phone to clients 10 days after an invoice has been issued simply to ask if it was received and was everything as expected with it. This has the added benefit of demonstrating to your clients finance departments that you take financial discipline seriously.
5.Sign Off and Order Numbers
Most companies operate some sort of procedure for procuring services. Make sure that the client facing people in your agency in particular have familiarised themselves with their clients procedures. It is surprisingly easy for an invoice that doesn’t contain an appropriate order number to disappear into ‘the system’ for weeks on end. Likewise getting sign off on costs and making sure a client is aware of any changes in costs as a project is progressing are vital to ensure prompt payment. Again it is surprising how many efficient and well run agencies, agencies who are on top of every aspect of a clients project, who are producing fantastic work and earning plaudits for it simply don’t fulfil the basics to ensure the final step to payment.
6.Know Your Customers
This isn’t just the account teams at your agency taking their counterparts at the client for a beer. Your client is made up of many departments, some of who you might rarely, if ever, deal with, that doesn’t mean you shouldn’t know them though, and vice versa. The finance department in particular should know exactly who you are, what you do and what value that brings to their company. This is a point often overlooked by agencies. Sure we want the clients sales and marketing people to know how indispensible we are, and if we’re lucky the chairman and the directors too, but why do we stop there. Find a way of communicating with other people at your client, we’re advertising people, we can find a way.
Law firms like my client exist because a surprising number of companies don’t follow these simple, common sense steps. Lawyers have enough money, lets not give them anymore!