No one would ever admit to encouraging their customers not to pay their bills. But it happens. All the time. Every time they send out an invoice, they’re effectively saying, “You don’t need to pay this”.
Now, that sounds crazy. Why would you encourage customers to hold on to your money? Why would you do anything to harm your cash flow and profitability in this way?
The answer? “Because that’s the way we’ve always done it!”
If you send out invoices, this might be a great time to check the format of that document. If it has those insanely conceived boxes that say, ’30 Days’ … ’60 Days’ … ’90 Days’ … and ‘Over 90 Days’ actually printed on the invoice, then what message is that giving the customer?
Permission! It’s giving them permission to pay at 90 days … or more. And that is a killer on your cash flow. And it’s totally unnecessary.
Now, when I make this point in seminars, often business owners will argue that if they don’t give 90 days credit, they lose the business. And that there’s no way that they can change the credit terms and lose customers.
This is more a problem in their head than it ever is in the head of the buyer. Buyers want a value package. They want the best solution. And if holding your money for 90 days is part of your package, then that is something you have brought upon yourself.
I make the point that in some cases, it may be better to risk losing those customers, and to build relationships with others who do pay on time. Remember … until you have been paid, you are operating as a gift shop.
I am not suggesting that you ‘foreclose’ on your good customers, and insist they pay up for all the backlog by close of business today. That will put perhaps too much strain on their cashflow (although their cashflow is your money, never forget that!). Rather, I suggest that you sit down with your customers, or call them, and map out a ‘catch up’ program. Explain that by being paid for the products and services you’ve already delivered, is the way you want your business to run, and that it will enable you to provide better services and value to them.
Reasonable customers will co-operate. The ones who don’t are simply using you. They don’t want the gift shop to close!
One of the things I emphasise a great deal in my seminars and programs, is that the seller has the power to determine the terms of the sale. For new business, it’s a matter of ‘laying the ground rules’ right up front as to your expectations in getting paid. It’s a mindset. It’s in the ‘languaging’ you use and your ‘belief system’.
Now if all that sounds a bit ‘out there’, I assure you it’s not. It’s just a case of being in control, of knowing the value of what you bring to the customer, and setting the rules for being paid accordingly.
Let’s take a completely different scenario to see why this is true.
Say you had a heart problem and you went to a heart surgeon. This surgeon has a top reputation, and instantly earns your trust. The surgeon tells you that he or she can operate to save your life. The surgeon then says, “Oh, by the way, the operating fee will be $40,000 and it’s payable on the day you leave hospital”.
Do you bargain with the surgeon? Do you ask for an invoice with 90 days or over on it? Do you tell the surgeon you’re going to get three more quotes to find someone who’ll do it cheaper?
You are no different, unless you choose to be. It’s all about positioning.
It’s your choice as to whether you stand meekly in line, waiting to be paid. Or whether you establish the ground rules, and be proud that you deliver such an amazing service, and that you expect to be paid.
When I first started out in my own marketing consultancy over 22 years ago, I used to invoice my clients and wait to be paid. It only took one client to fail to pay to teach me the folly of that. I still had to pay my suppliers! So from that point on, my ‘terms’ have been 50% up front, and 50% on delivery of the creative. It works for me.
I’ve shared this philosophy with a number of clients who have literally turned their businesses around by re-writing the ground rules with their customers. I can absolutely guarantee you that they ripped up those old invoices with the ’30 Days’ … ’60 Days’ … ’90 Days’ … and ‘Over 90 Days’ boxes on them!
This is just a brief insight into my radical approach to taking control of your marketing and of your business destiny. My purpose is to challenge your thinking at every turn. There’s a whole lot more of that in the products I’ve created for you … starting with ‘Marketing Miracles for Everyday Businesses’. Be prepared to start thinking very differently, and to making a lot more profit as a result.
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To read more articles related to this go to the Marketing Foundations section of the Academy.