First Step Marketing

If you plan to start a business where it’s standard procedure to collect payment before you provide your product or service to customers, you can skip this section. Obviously, most retail businesses conduct pay-as-you-go transactions: customers can choose to not use their own money to pay up front by using a credit card; however, their purchase then becomes more expensive with the subsequent interest charges if they don’t pay it off all at once. But that’s their problem, not yours. You still get paid up front.

If yours is a service-oriented business, or some other type of enterprise for which it is the industry standard for customers to pay for services rendered after you complete the work, possibly long after they receive it, well, that’s another story. The debt- collection industry is growing by leaps and bounds, and not just by negotiating with consumers to pay a long-ignored credit card bill, either. Business owners who may have hired your company to perform services were most likely fully confident that they would be able to pay your bill when it came due thirty days down the road. Sometimes life takes unexpected twists, however, which means you may have to chase them all the way to small claims court, or perhaps hire an attorney who specializes in collections to do your dirty work.

Most business owners with overdue accounts do not get to this stage deliberately. Once you start your business, you’ll discover how unexpected turns and twists in the entrepreneurial road can quickly turn your dreams of great success into scrambling to keep the light bill paid. This is how you may become low priority on a customer’s accounts payable list.

Again, it depends on the type of business you run, but where net thirty is the rule, try to collect 50 percent of the total fee before you commence working when you undertake any new customers. Then you can bill once again after you complete the project.

Better yet is to arrange to bill a client’s credit card in installments. That way, you’re more likely to be paid in full. The time frame you’ll receive your money in—sooner, rather than later or maybe not at all—is worth the few percentage points you’ll pay the credit card company for having the privilege of merchant status. In fact, since many Americans use plastic for almost everything imaginable—and the majority pay their bills in full each month—it’s worth your while to become qualified to accept MasterCard, Visa, and American Express. The more choices you provide your customers, the easier it will be for them to pay you, and the more likely they will choose you over a competitor who doesn’t make it as easy for them to pay when their cash is a little low.

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Extending Credit to Customers

This entry was posted on Thursday, November 13th, 2008 at 10:56 am and is filed under Startup. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.