Much has been written to help
people avoid scams when they are looking for business opportunities. But
opportunity seekers aren't the only ones who are getting swindled online
and on the Internet. Sellers of merchandise and services are getting
burned, too.
Case in point: a New England
business owner recently wrote to me to ask how they could collect on out
of state debts. They had sold more than $1500 in advertising specialties
to a business in another part of the country. The business owner trusted
the person to whom the goods were sold, because the customer "acted
as a friend." Then the business owner explained, the customer,
"promised to pay, said the 'check was in the mail', even told me she
was moving to [my state].....It is difficult to track her down... she
continually lies and avoids me...her e-mail responses used to quite
flowery and apologetic, now she doesn't respond at all."
Collecting after the fact is hard
to do.
It is particularly difficult and
costly to do when the individual or business that owes you money is
located in a distant part of your state or in another state or country.
While nothing will insure you will never have collection problems, you can
minimize collection problems by implementing some or all of the
suggestions below.
Have your attorney help you
design a credit application that will establish a legally binding
contract, and then have all customers to whom you will be selling on
credit complete and sign the credit application.
Get as much information from
the customer in advance as possible. Get their full name and address,
business address, and business telephone numbers, fax numbers, email
addresses (get multiple email addresses if they have them), drivers'
license number, former address, maiden name, and if the order is big,
the name of their bank and bank account number. In short - all the
same information you're asked to fill out when you apply for credit.
Verify the address and phone
numbers you are given. Call back the day after an order is placed to
make sure the person who gave you the order is at the phone number
given. If it's a business, call the business headquarters and ask if
the individual works there. If you gather information via email,
immediately print the information and store in a paper file so you can
find it if you lose your email on disk or if your hard disk crashes.
Ask for three credit
references and check them.
Run a credit check.
Discuss credit terms at the
time the sale is made. If you don't get all the details straightened
out up front you may wind up in a situation where you are expecting
payment on delivery or within, say 10 days, and the client expects to
have 30 days after receipt of your bill to pay. Under those
circumstances, a collection call from you 2 weeks after delivery is
likely to make the client annoyed, and kill any chance you might have
for additional sales to the company.
Put everything in writing. It
is the only way you have of proving what terms you and your customer
agreed on.
If you will be billing a
company, find out who should get the invoice.
Get part of your money up
front. Common arrangements are 50% down and the balance on delivery of
the product (or completion of the service) or progress payments (i.e.,
1/3 down, 1/3 halfway through, and 1/3 either on delivery or within 10
days of delivery.) If you will be buying services for your client, or
subcontracting some of the work, try to get enough money before
delivery to cover all of your expenses and some profit. An artist I
know nearly lost his house because he was acting as an agency and was
paying all the typesetting, printing and space costs for a small
corporation that had a big cash flow problem.
Consider COD or full payment
in advance from out-of-state customers.
Have the customer charge the
purchase, instead of billing them for it.
Send out invoices promptly.
And, send out reminder notices promptly if payment doesn't show up
when expected.
IMPORTANT NOTE:
Information provided in Business
Know-How™ is general in nature and should not be considered individual
advice. Consult your own attorney, accountant or other advisor before
taking any actions that might lead to adverse consequences
The information compiled on this site is
Copyright 1999-2009 by Attard Communications, Inc. and by the individual authors.
Business Know-How is a woman-owned business and a registered trademark of Attard Communications, Inc.
Phone: 631-467-8883.
