UX Magazine

Defining and Informing the Complex Field of User Experience (UX)
Article No. 54 October 4, 2006

Pay Fast. Get Paid Faster.

Everyone loves to talk about cash flow and your CFO will work hard to cast a positive light on the bottom line on your profit and loss statement. But before complex analyses of cash flow, amortization, counting your unpaid client invoices as an asset and ignoring the ones you have not paid yet comes a more fundamental philosophy that sets everything else in the right direction. Pay fast. Get paid faster.

Step 1: Pay fast

Every body loves to pat themselves on the back about how long they can string out paying bills/invoices but if that is how to need to operate your business then you already have some cracks in the foundation.

Some truths:

  1. You want to be valued by the businesses that consider you their client.
  2. No matter how good a relationship you may think you have with them nothing will break it faster than you being a lousy payer.
  3. Every day you don’t pay that bill you add stress to their life and their business.
  4. When you pay fast you become considerably more valuable to them as a client. Many good things come from that position

Step 2: Get paid even faster

To make step 1 really work for your business you need to get paid even faster than you get paid. I have grown into a bit of a fanatic on this topic with good reason. Nothing cramped my old freight business more than how long it took us to get paid by our clients. It caused us to consistently increase our borrowing from our banks and grabbed focus from and added pressure to every other aspect of our business. Here is the rule, please repeat it with me and to your customers/clients:

“We are not a bank”

Allow me to give an example with a little story…I once had lunch with a gentlemen who, at the time, was the CEO of one of the largest freight companies in the world. He had grown it to this position in roughly 5 years from a business that was similar in size to my own. Here is how he told me he set the foundation for his amazing growth.. He took a look at his list of money he was waiting to receive from his clients and how long it was taking to get paid. He set out, himself, to visit each and every customer and tell them “We are not a bank. If you want to continue to be our customer then you need to stop treating us like one. You certainly do not want to start paying us like one.” And he was willing to lose a client if they didn’t value the relationship enough to pay promptly.

The result in this fundamental shift was a huge surge in cash in the bank (See Brickyard Brick) that gave him the power and leverage to spend money on expansion, marketing, innovation and acquiring other companies that were strapped for cash.

Reset the foundation:

  1. Make it clear right at the start that you will run through walls for your clients but they must pay you timely.
  2. Send your bills out to clients right away (I am amazed at how many vendors I have to ask to send me an invoice)
  3. Be relentless about collecting the money that is due to you when it is due. The more you bend on this one the farther down into the hole you will slide. “They are an important customer so it is OK” will not cut it. Want to appreciate your clients more? Work with clients that keep their word and do not take advantage of you.

Pay fast. Get paid faster. “We are not a bank”

Add those principles to your business plan, projections, VC Presentations and key goals for the year. Most importantly, drive it into the core of your business. The results will be found in YOUR bank.

ABOUT THE AUTHOR(S)

User Profile

Howard Mann is the founder of Brickyard Partners, a business strategy agency based in Portland, OR. Prior to founding Brickyard Partners in 2001, Mann owned a premier international logistics company with over 140 Million in revenue, six U.S. offices and a global network of over 40 agents worldwide.

As that business came under severe pressure from the previous economic downturn and industry consolidation, Howard lead the company out from those treacherous times by returning to the basics that make every business great and completing 6 acquisitions that re-imagined the business so it was highly attractive to buyers. Finding that “secret sauce” did not come easily but has fueled his purpose to help other business leaders to never have to go through what he endured. 

Through real world experience and those hard times in the “trenches” of business he has learned that it is not following the latest fad, copying competitors or adding complexity that makes a business truly great. His pragmatic approach and knowing what it feels like to sit in the CEO/Owner chair is what makes his work so different and effective.

In addition to his strategy, marketing and communications work, Mann coaches a select group of entrepreneurs, CEO's and business owners. His highly focused workshops and keynotes help executive teams take aggressive action to unlock the true potential of their organizations and build remarkable businesses that endure. In good times and bad. Online and off.

Howard is a sought after speaker both in the U.S. and around the world. He writes frequently on his blog about the importance of the basics and reconnecting to the passion that too often gets lost as businesses mature.

Add new comment

Comments

82
80

Thanks for the good article. I think this is a healping article for running successful bussiness.

93
77

Some truths: a) You want to be valued by the businesses that consider you their client. b) No matter how good a relationship you may think you have with them nothing will break it faster than you being a lousy payer. c) Every day you don’t pay that bill you add stress to their life and their business. d) When you pay fast you become considerably more valuable to them as a client. Many good things come from that position.

92
89

Economic downturns are not new, or, in the east to that age. And while what we now face are more serious, reactions and behaviors of companies feel too familiar. One of the most insidious by-product of the times, after the waves of belt tightening and budget / staff cuts are the late payment of long and painful. When business slows, payments to suppliers are stretched. If this has not begun to happen to you, however, soon if not part of their approach to prevent it.
Orkut Scraps

70
101

It's not going to hear for working hard and yet do not received for payment oh they don't deserved it to be treated like that. Making an effort to work its because running for a payment and yet nothing?
benjaminhulme@gmailcom

91
79

Our policy is to wait 90 days for payment, and if they haven’t paid we take down their site and change their admin passwords. It’s a bit harsh, but we usually get paid within 24 hours of this. Clients know going in that this will happen to delinquent accounts.

82
85

Some good points in this article. If you get your terms of business agreed from the outset, then this helps avoid late/non payers - i.e. when the work is completed, the amount is then due - no 30 day credit etc. It's when you have a grey area that issues arise - either because of confusion, or because the client wants to avoid or delay paying.

Techdesigns - web design

89
86

Hope can get this works on the practice, there is to much useful tips to sucess.

90
95

Awesome. I definitely will pass this information to my friends.

71
93

Thanks for an interesting article, but you should learn to spell check before you post.
http://www.b2bcfo.com/

71
89

I contact the clients as soon as they are a day late and let them know. They can only ignore me so long before I get the mafia...

Janet from self help books

79
80

As a freelance designer/developer this rings too true. When I started I went through months of trying to track down clients who hadn’t yet paid their last bill for a site that was now fully functional and running. They were getting full use of my services for which they haven’t paid.

My solution was to setup subdomains where I host their site where I develop, test, debug and get final approval on. Once they approve the final design I receive the last payment and they get their site. They don’t get it until that point.

I actually had one client tell me that he didn’t have the money for the last payment so I didn’t give him his site. Two months later he paid the final payment and got his site, when I asked him why he waited so long he said “I was planning on giving you the final payment in two months when I had enough money.”

80
89

Interesting read, thanks.

90
80

Sorry be a nit-picker folks, but there are a lot of spelling mistakes and grammatical errors in this article.

I figured you’d want to know so you could fix it.

77
90

Our policy is to wait 90 days for payment, and if they haven’t paid we take down their site and change their admin passwords. It’s a bit harsh, but we usually get paid within 24 hours of this. Clients know going in that this will happen to delinquent accounts.

92
79

Really instructive article.Thx!

81
95

Thanks for the good article. I think this may help me with some difficult clients in the future ;)

81
82

You’re so right, people can really push things. I used to be quite flexible on payment, but for the last few jobs we’ve been asking for 50% up front and then they only get the site once the remaining 50% arrives. Works a treat.

81
85

Nice advice Howard but you left a few things out. At what point should you get the mafia get involved and what size of pipe wrench would you recommend?

82
89

Greg, may I suggest the Heavy-Duty Straight Pipe Wrench

It’s “Sturdy cast-iron housing and I-beam handle with full floating forged hook jaw” really works like a charm ;)

78
79

Excellent point Greg. Perhaps in addition to “We are not a bank” I should add “But we CAN treat you like a loan shark.” ;)

83
85

One thing that helped my business (web design and development) decrease payment time was including a prepaid, self-addressed (to my business) check envelope with the clients return address in the final invoice that I send them. Once less thing for them to worry about.

81
94

While it is always helpful to build in ways that help clients pay faster I have found that setting the mindset right, your and theirs, at the start is what makes the long term difference. With online banking and automated payable systems it takes seconds to make a payment. They simply have to make that task a priority because of the impact it will have on the relationship between your 2 companies.

Too many clients make paying you far less important than they should and often turn it all into a game. As soon as you join them in this game you have lost.

76
80

Barry, your idea fits my personality more. By including the payment envelope (or instructions for an online payment option), you’re subtly telling them that you want to be paid right away. Saying “we’re not a bank” might be appropriate for the freight industry, but I think you’ll get better results with more subtlety in the professional services.

89
82

Appreciate the concern Dusty. “We are not a bank” is meant to be more of a mindset than something you actually say to a client.

I brought the mentality that I learned (the hard way) at my freight business to my marketing and interactive business and it has proved invaluable.

In my experience, people do not pay poorly because they could not find an envelope to send the check in. It certainly is a nice touch but they have to WANT to pay you promptly first.

78
82

I take a 50 percent deposit before I will start work on any project. I’ve done this for years and only had one company refuse to pay the deposit. It’s a good bet that if a company doesn’t want to pay the 50 percent deposit they don’t have the money for the project.

My annual bad debt is almost zero and the majority of my invoices are paid within 10 to 14 days of being received. I simply tell my clients that my invoices are due upon receipt, not in 30 days. I expect prompt payment when the work has been completed. If you outline your billing process before the project starts, then clients know what to expect and you have much less trouble with payment.

It also helps the client to budget for the project, they know what they’ll have to pay, and roughly when they have to pay it. A good website is an investment which pays for itself so many times over each year that it’s not really about the cost. It’s about being open and communicating with clients so they know what’s going on. The more you do this, the easier it is to collect on invoices.

89
73

I call clients when they become 30 days past due….I find that if you wait 90 days, it is too hard for them to catch up. Normally if a client hasn’t paid there is a simple problem that can be resolved by a phone call. If they haven’t paid in 90 days or haven’t repsonded to me we shut off their site. As someone previously mentioned, it is amazing how quickly they pay you then!

84
86

Superb article and a really refreshing change to have someone else reiterate my own feelings and philosophy on this matter. From experience in previous businesses, when we started up on our own in business we adopted and have to this day continued with a fairly ruthless attitude to credit control. We extend short terms (7 days typically unless requested for otherwise) and police it aggressively. 7 days over and they find themselves on credit stop. For websites its 50% up-front and the site live when the balance is paid. No balance, no site, period. Serial poor payers are given the opportunity to reform or dropped from our books – nothing hurrts more than being told you’re outta there. Sorry but you were warned. I recently attended a seminar provided by MYOB, our accounting software provider in which a senior analyst confirmed that the majority of failures of ‘profitable’ businesses in Australia was due to cash flow – from being strung out on payment. Police or die and dont feel bad about it – they wont worry if you go broke.

85
90

Hi, all. Read the article…
I know for a fact, that presenting a complete and bullet-proof proposal, with a specific how-when-what payout plan is the key. Otherwise “asking” for your money is a game of words and how each party wants to “interpret” them. Be specific from the beginning on dates and ways of payment. In this model eacy party knows when it has to pay or recieve anything.
Why? Cause if you say to a client “I do not deliver the project unless you pay” at the moment of delivery, without having him heard of this instruction(and most of all signed/aggred for this instruction), before all you gain is bad comments and bad publicity for yourself and your company.

86
92

Hi, all. Read the article…
I know for a fact, that presenting a complete and bullet-proof proposal, with a specific how-when-what payout plan is the key. Otherwise “asking” for your money is a game of words and how each party wants to “interpret” them. Be specific from the beginning on dates and ways of payment. In this model eacy party knows when it has to pay or recieve anything.
Why? Cause if you say to a client “I do not deliver the project unless you pay” at the moment of delivery, without having him heard of this instruction(and most of all signed/aggred for this instruction), before all you gain is bad comments and bad publicity for yourself and your company.

84
79

Superb article and a really refreshing change to have someone else reiterate my own feelings and philosophy on this matter. From experience in previous businesses, when we started up on our own in business we adopted and have to this day continued with a fairly ruthless attitude to credit control. We extend short terms (7 days typically unless requested for otherwise) and police it aggressively. 7 days over and they find themselves on credit stop. For websites its 50% up-front and the site live when the balance is paid. No balance, no site, period. Serial poor payers are given the opportunity to reform or dropped from our books – nothing hurrts more than being told you’re outta there. Sorry but you were warned. I recently attended a seminar provided by MYOB, our accounting software provider in which a senior analyst confirmed that the majority of failures of ‘profitable’ businesses in Australia was due to cash flow – from being strung out on payment. Police or die and dont feel bad about it – they wont worry if you go broke.

86
83

I call clients when they become 30 days past due….I find that if you wait 90 days, it is too hard for them to catch up. Normally if a client hasn’t paid there is a simple problem that can be resolved by a phone call. If they haven’t paid in 90 days or haven’t repsonded to me we shut off their site. As someone previously mentioned, it is amazing how quickly they pay you then!

94
83

I take a 50 percent deposit before I will start work on any project. I’ve done this for years and only had one company refuse to pay the deposit. It’s a good bet that if a company doesn’t want to pay the 50 percent deposit they don’t have the money for the project.

My annual bad debt is almost zero and the majority of my invoices are paid within 10 to 14 days of being received. I simply tell my clients that my invoices are due upon receipt, not in 30 days. I expect prompt payment when the work has been completed. If you outline your billing process before the project starts, then clients know what to expect and you have much less trouble with payment.

It also helps the client to budget for the project, they know what they’ll have to pay, and roughly when they have to pay it. A good website is an investment which pays for itself so many times over each year that it’s not really about the cost. It’s about being open and communicating with clients so they know what’s going on. The more you do this, the easier it is to collect on invoices.

87
85

Appreciate the concern Dusty. “We are not a bank” is meant to be more of a mindset than something you actually say to a client.

I brought the mentality that I learned (the hard way) at my freight business to my marketing and interactive business and it has proved invaluable.

In my experience, people do not pay poorly because they could not find an envelope to send the check in. It certainly is a nice touch but they have to WANT to pay you promptly first.

85
90

Barry, your idea fits my personality more. By including the payment envelope (or instructions for an online payment option), you’re subtly telling them that you want to be paid right away. Saying “we’re not a bank” might be appropriate for the freight industry, but I think you’ll get better results with more subtlety in the professional services.

87
84

While it is always helpful to build in ways that help clients pay faster I have found that setting the mindset right, your and theirs, at the start is what makes the long term difference. With online banking and automated payable systems it takes seconds to make a payment. They simply have to make that task a priority because of the impact it will have on the relationship between your 2 companies.

Too many clients make paying you far less important than they should and often turn it all into a game. As soon as you join them in this game you have lost.

91
97

One thing that helped my business (web design and development) decrease payment time was including a prepaid, self-addressed (to my business) check envelope with the clients return address in the final invoice that I send them. Once less thing for them to worry about.

71
86

Excellent point Greg. Perhaps in addition to “We are not a bank” I should add “But we CAN treat you like a loan shark.” ;)

82
89

Greg, may I suggest the Heavy-Duty Straight Pipe Wrench

It’s “Sturdy cast-iron housing and I-beam handle with full floating forged hook jaw” really works like a charm ;)

77
87

Nice advice Howard but you left a few things out. At what point should you get the mafia get involved and what size of pipe wrench would you recommend?

85
92

You’re so right, people can really push things. I used to be quite flexible on payment, but for the last few jobs we’ve been asking for 50% up front and then they only get the site once the remaining 50% arrives. Works a treat.

87
90

Thanks for the good article. I think this may help me with some difficult clients in the future ;)

82
93

Really instructive article.Thx!

86
75

Our policy is to wait 90 days for payment, and if they haven’t paid we take down their site and change their admin passwords. It’s a bit harsh, but we usually get paid within 24 hours of this. Clients know going in that this will happen to delinquent accounts.

85
77

I follow exactly the same process and it works.

I use Billings for the Mac to manage my invoicing and statements. Clients get a statement every month and if the balance is outstanding after 3 months their site gets terminated, unless they are on a monthly payment plan.

83
77

Sorry be a nit-picker folks, but there are a lot of spelling mistakes and grammatical errors in this article.

I figured you’d want to know so you could fix it.

86
82

Interesting read, thanks.

90
91

As a freelance designer/developer this rings too true. When I started I went through months of trying to track down clients who hadn’t yet paid their last bill for a site that was now fully functional and running. They were getting full use of my services for which they haven’t paid.

My solution was to setup subdomains where I host their site where I develop, test, debug and get final approval on. Once they approve the final design I receive the last payment and they get their site. They don’t get it until that point.

I actually had one client tell me that he didn’t have the money for the last payment so I didn’t give him his site. Two months later he paid the final payment and got his site, when I asked him why he waited so long he said “I was planning on giving you the final payment in two months when I had enough money.”