by Janet Attard
Seller Beware: Much has been written to help business people and consumers avoid scams when they make purchases on the Internet. But buyers aren't the only ones who are getting swindled online. Sellers of merchandise and services are getting burned, too. Use these tips to avoid problems before they arise.
Selling on the Internet can be a good way to expand your reach and grow your business. But it's not without its challenges. One of the biggest challenges for small business is that buyers are often out-of-state and pursuing them for non-payment, bounced checks, or credit card fraud is expensive and difficult for small businesses.
Case in point: a New England business owner 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 be quite flowery and apologetic, now she doesn't respond at all."
Unfortunately for this business owner, 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.