I have found that by creating policies that we state in our standard letter of agreement for every customer that we do business with, that we have improved our cash flow and nearly stopped bad debts. With a bit of forethought you can create scenarios where you are not required to provide services for clients that receive credit card declines or routinely do not pay on time.
Although these recommendations will not work for every business, these have worked for mine.
- All clients pay in advance for the month for blogging and Google AdWords services. We have found that once AdWords services have been provided or blogs installed that the client, in some cases, does not feel compelled to pay if they have run into money problems. The services that we provide are not tangible (hold in your hand products) and so our payment in a financial dry period may be deferred. While not to our liking, this is the reality of the situation and why we now request payment up front.
- When a client has received a credit card decline for services, we immediately stop services. We have found by continuing services hoping the situation will be resolved we have sometimes allowed the client to dig a deeper debt hole. By stopping immediately we lessen our potential debt damage and push the client to resolve the issue quickly.
- Once a client has had a credit card declined but then paid, we move them from paying on the 10th of the month, if they are an auto-billing client, to payment or at least credit card authorization on the 27th of the month prior to us starting services on the 1st. If their credit card is not declined for three months, we move them back to paying on the 10th.
- Self pay clients who consistently pay late are requested to move to auto-billing services. If the problem continues, we will stop providing services as it is too time consuming to chase a payment from one client. Sometimes a phone call and discussion on helping us to keep our prices low is in order or sensitivity to a personal situation and adjustment in writing frequency is in order, but we do not write without payment regardless of the circumstance.
These policies have been crafted over years of experience working with blogging and AdWords clients. Although our model may not work for you, we have seen our slow payers really drop off, our bad debts move to almost zero, and our monthly cash flow become more dependable.