Collecting on overdue invoices

[Dan Furman]

not to add fuel to the fire, Spider, but one thing really keeps cropping up in my mind:

If you had a client like me in your coaching biz, you would be doing them a HUGE disservice (and I mean HUGE) by telling them to always "bill later". Trust me on this one.

[billbenson]

Dan, I don't think Spider was telling you what to do. He is prompting you to consider all options as he would on other decisions you have to make. He said somewhere "he doesn't tell you what to do as a coach, he encourages you to think through all angles before discounting any one of them". He also likes to play devils advocate. At least thats the way I read this thread while sitting on the sidelines.

[Dan Furman]

Dan, I don't think Spider was telling you what to do. He is prompting you to consider all options as he would on other decisions you have to make. He said somewhere "he doesn't tell you what to do as a coach, he encourages you to think through all angles before discounting any one of them". He also likes to play devils advocate. At least thats the way I read this thread while sitting on the sidelines.

That part I do understand (and i get the Devil's advocate thing - I take that route myself sometimes . What I'm more or less responding to is the assumption that asking for a deposit is a bad business move. It's not, especially for this new breed of internet-based business.

[Spider]

This has begun to get amusing! (Not that I wasn't enjoying it before, but now I find myself smiling.)

1. If you know the difference between encouraging you to think through all angles before discounting any of them, and playing devil's advocate, please let me know.

2. I love the assumption that I have made assumptions when I have no assumptions to make, not being involved in the outcome.

3. I wonder why you are trying to convince me that I am wrong. I am neither right nor wrong because I'm not taking a stand either way. My purpose is get you to think, not just react, and to re-think the results of your former reaction.

4. How I'm the one who is not thinking outside the box, when I have no box in which to confine myself in this discussion.

Let me put it like this --

There are several of you in this discussion who have overlapping businesses, competitive to some degree if not totally. But outside this forum, there must be thousands of people doing what you do. That's where your competition is.

Are we not told - don't you say, often - you have to be different from your competition - find some way to make yourself stand out. Why? Why bother, if you are not interested in growing your business? Being different from your competition draws their attention and gives you an edge in the "battle for the business."

Now, you all say you need to have a deposit before doing any work. You are all the same in this regard, and you seem to be telling me that all your competition outside this forum does the same. Because it is necessary. It doesn't matter whether I agree with that or not. You all insist on receiving payment first.

The reasons for demanding payment up front are A, B, and C. (It doesn't matter to me what those reasons are, nor whether I think they are valid. They are real to you, therefore they are real.) Now, What if you can satisfy A, B and C without demanding a deposit. What difference might that make to your business?

It would set your business apart. It would make your business stand out.

And, further, don't suppose that all people who balk at paying a deposit are intent on swindling you. There are many who find the demand for a deposit a clear statement that you do not trust them, and who wants to hire a person who does not trust them?

Wouldn't it benefit your business if you could find some way to protect yourselves from A, B and C at the same time be the only business of your sort that provides a trustworthy environment to do business, instead of starting out in distrust.

I'm not saying I know how you can do that - although I'm willing to explore that with you and make suggestions. This is where the intimate knowledge of your niche is needed. Not yet.

[Harold Mansfield]

Let me put it like this --

There are several of you in this discussion who have overlapping businesses, competitive to some degree if not totally. But outside this forum, there must be thousands of people doing what you do. That's where your competition is.

Are we not told - don't you say, often - you have to be different from your competition - find some way to make yourself stand out. Why? Why bother, if you are not interested in growing your business? Being different from your competition draws their attention and gives you an edge in the "battle for the business."

Now, you all say you need to have a deposit before doing any work. You are all the same in this regard, and you seem to be telling me that all your competition outside this forum does the same. Because it is necessary. It doesn't matter whether I agree with that or not. You all insist on receiving payment first.

The reasons for demanding payment up front are A, B, and C. (It doesn't matter to me what those reasons are, nor whether I think they are valid. They are real to you, therefore they are real.) Now, What if you can satisfy A, B and C without demanding a deposit. What difference might that make to your business?

It would set your business apart. It would make your business stand out.

At this point I think there is no way or reason to reinvent the wheel. The possibility of getting ripped off from people who sound very cordial, educated, and professional over the phone is very real all of the time. You would understand if the majority of your business was done without any face to face contact.

And, further, don't suppose that all people who balk at paying a deposit are intent on swindling you. There are many who find the demand for a deposit a clear statement that you do not trust them, and who wants to hire a person who does not trust them?

I don't. I don't trust them to to pay.

No one in this world trusts anyone to pay later...that's why there are credit checks that include all of your information, friends, family and mothers maiden name.
Like I said, the only business that still exclusively trusts people to pay is Pizza delivery, and that's probably because they at least have an address to go on and the product isn't handed over without payment.

Wouldn't it benefit your business if you could find some way to protect yourselves from A, B and C at the same time be the only business of your sort that provides a trustworthy environment to do business, instead of starting out in distrust.

I'm not saying I know how you can do that - although I'm willing to explore that with you and make suggestions. This is where the intimate knowledge of your niche is needed. Not yet.

There is another alternative. It's called Escrow. It's used a lot in high dollar domain sales.
Other than that, I just don't see it.

No one is undervaluing being able to think outside of your comfort zone to come up with ways to do business that set you apart from the competition, but in this instance..getting paid is the whole kit and caboodle and the possibility of fraud and wasting your time is too great to risk. I don't see any reason to reinvent getting paid and billing.

I can tell you right now that if I don't require a deposit I will absolutely get more people that want me to do work for them and I will loose hours working for nothing, and trying to collect every week, after the fact..costing me even more money and taking away from time I could use to grow my business and actually do work for which I actually get paid.

My phone would likely be ringing off of the hook because word would be out that I am stupid, or a sucker.

As everyone keeps trying to tell you. This issue has been tried and tested in a variety of ways and the only thing that works when you are dealing with "virtual" people is money up front. For now...I can definitely say with certainty..on that subject..there is no other cost effective way to protect yourself from getting scammed and wasting your time.

Besides that, a "Pay Later" business model is not MY business model and not why I went into business in the first place. Changing to that model would mean going out of business since I know the danger and problems associated with it and know that it is a foolish way to do business with people that you don't know.
This has nothing to do with thinking "outside the box", and more to do with managing your business.

I don't think it has anything to do with what type of business it is and this isn't something that is only characteristic of web services. I can't think of more than a hand full of businesses that do not require some kind of payment, deposit or access to credit information to provide a product of service...and 3 of those are food delivery.

To think of running your business this way would require that you change human behavior around the world. That's how unrealistic it is.

[cbscreative]

I appreciate the challenge, Frederick, but I'm forced to go with the majority on this one. I don't agree that it sets a tone of distrust. It's actually the opposite. It sets us as professionals who value our time, and when I get to the point of asking for the up front payment, it is a non-issue. There are plenty of other areas to set ourselves apart.

One last point worth mentioning: the word competition is relative in our industry. While the bottom feeders that undercut each other to try to scramble for scraps from cheap clients have competition, very cutthroat competition at that, the reason so many of us can be on a forum and mutually respect each other is that we view it less as competition. I prefer the term colleagues. If Dan and I were competing for the same project and Dan got it, I'd be happy for him, and I would appreciate the fact that the client would be well taken care of. It's when it goes to a hack that true professionals shake their head. Not only will that client get a raw deal (though they might think they're saving a lot of money), there is a very high likelihood they will be among the 80 percent who fail in business.

In our business, those who view the "competition" the same way other industries are prone (or required) to do, don't understand the real purpose of our trade.

[Spider]

Well, that pretty well ends the discussion, doesn't it!

[cbscreative]

Well, that pretty well ends the discussion, doesn't it!

Maybe so, but it's been interesting.

[Harold Mansfield]

I looked but am probably not searching correctly, but I remember seeing some statistics a while back on how much is lost every year on unpaid invoices. You can probably apply the same logic and statistics to housing foreclosures, repossessions, and bankruptcies which we can all agree are sky high right now.

Those are all promises to pay that went awry, costing the creditors or businesses billions.

The statistics I was looking for associated lost time and money dealing with collections and how much it affected the bottom line. It also showed how much a business has to set aside or plan on spending for collections and from what I remember it turned out to be a significant percentage..double digit.

As small businesses, we have to keep that number as close to zero as possible. I can't afford to have a percentage of my resources go to collections.

If anyone remembers that study or can find those stats, I 'd be interested in seeing them.

[billbenson]

I think one of the reasons you guys are coming to the conclusion your are is your customer base. If you were dealing with, say Proctor and Gamble or some other large corporation you would likely be dealing with Net 30 terms, no money up front. You would however receive a purchase order which is a contract. The project would likely be cut into milestones so you would receive payments in increments. Proctor and Gamble employees can likely circumvent this system and pay you by credit card as long as the work isn't terribly expensive. That depends on company policies, but purchasing departments like to have control of this stuff. Purchasing agents also like to pay receivables and get them off their desk (per the terms of the PO) as they are overworked like everyone else these days.

My point is you find yourselves asking for money up front because of your customer base IMO. Taking Spiders line of thinking, you could possibly look to see if what you do fits into changing that customer base to one which pays.