The Sale ain’t made 'til the bill is paid!

It’s funny, almost every one of us would celebrate making a sale – and so we should, it’s a big thing, but it’s not the whole deal and never forget that!!! Strong opening statement? It’s probably not strong enough…

You only have a complete deal when you’ve made a sale, done the work and then collected the readies. Don’t disillusion yourself into thinking that you’re doing amazingly well just because sales are being made – getting the money in the other end is just as critical and sometimes just as tricky 🙂

Its very easy when you’re new to business to let your clients get away with not paying you very quickly – don’t worry I’ve been there and done it myself. This, however is not a good strategy and will only leads to problems, here are just a few of them:

  • The time you’ll waste chasing debts can become ridiculous – taking you away from your day to day work
  • Clients can begin to ‘expect’ better terms
  • Many companies have a ‘don’t pay until questioned’ policy – if you don’t ask, you simply won’t get
  • As you get more established, older clients that have been with you since the early days will continue to pay you on the old terms you let them get away with – this is very hard to change down the line
  • Clients will know those suppliers that are less likely to cause them problems when it comes to asking for money – you’ll be further down their priority payment list
  • An aged debt is more likely to turn into a bad debt

If you’re about to start a business or are still fairly new to it all, make a strict policy for how you’re going to deal with the collecting of monies and stick to it.

Here are a few quick suggestions:

  • Create regular statements – At least once a month – send your statement in the middle of the month when most other companies send theirs at the beginning or end, it’s more likely to get noticed.
  • Try and make your statement stand out – We have a stamp with a picture of a man crying, saying ‘please pay this, it’s overdue’
  • Keep a close eye on your aged-debtors list – At least  once a month
  • Don’t be afraid to ask for the money – after all, you did the job, you deserve it
  • Have a process in place for chasing debts that are older than your terms
  • Consider if you can minimise your risk of bad debts and cashflow issues by putting in place deposits or at least stage payments
  • If the debt gets really old, don’t be afraid of losing a customer by passing it to a collector, are they really worth having as a customer if they are putting you through this? I hear you thinking, ‘but yes Al that’s fine but they are so important to my company, I can cut them a bit of slack can’t I?’
    Seriously, it’s not worth the agro – get yourself a policy and make sure you stick to it religiously, whatever the size or importance of your client. No exceptions.

One last tip, if you employ sales people who are have any sort of commission, make it a condition of that commission that’s its only paid when the money owed from the client is in the bank. Give them the responsibility of getting the money in – this will make your life easier in keeping on top of aged debts.

How have you found getting money in? Do you have any further tips for business owners regarding this tricky issue?

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  1. Dan Cave on 30th April 2010 at 9:18 am

    I find attaching the following statement to the bottomof invoices helps:

    “Penalty fees will apply for late payment of this invoice in accordance with Small Business Regulations and Late
    Payment of Commercial Debts Regulations 2002.” –

    Then again I very rarely enforce it, and even then its only for smaller Jobs.

    • Banksy on 30th April 2010 at 2:22 pm

      Enforcing is the key though Dan – if you let people get away with not paying, or paying late it can really bite you in the you know what later – Not everyone pays aswell as me 😉

  2. Tim Burley on 30th April 2010 at 9:41 am

    Consider implementing a credit limit for all clients – even the very big ones. Have a process that you go through when adding a new client account to your books – credit check them, decide on a sensible level of credit and then stick to it. When incoming purchase orders push your client over the credit limit, explain the problem and agree a solution.

    I find most clients appreciate the fact that we run a tight ship, even if it causes a few awkward conversations along the way! It means we’re more likely to be around for the long term.

    • Banksy on 30th April 2010 at 2:11 pm

      Great tip on credit levels Tim – I’d be interested to hear your opinions on credit checking as I’ve heard mixed opinions. As we all know, its fairly easy for a company to hide poor figures (especially SMEs)

  3. Malcolm Sleath on 30th April 2010 at 12:22 pm

    If you are a small business and deliver consultancy-type projects that can be subject to delay because clients rearrange schedules it can cause difficulties.

    When writing your proposals, you could consider specifying a payment schedule based on the calender, independent of what is delivered when. Clients will accept this at the outset because they are confident that they will conduct the project on schedule.

    The outcome is that you get paid when you expect to be paid – because you established a good relationship with the purchase ledger people and let them know about the schedule – and the client is motivated to progress the project because they have already paid.

    • Banksy on 30th April 2010 at 2:13 pm

      Great tip Malcolm – In fact, building a relationship with accounts depts was a tip in one of my previous posts. It makes it all the easier calling that person with the chequebook when you really need to get the money in 🙂

  4. Robin Dickinson on 30th April 2010 at 12:41 pm

    Great advice, Banksy.

    In service businesses, I’m a huge fan of getting 50% upfront with terms of “Immediate Payment”.

    My debtors days are around 5 days and it makes a huge difference to cash-flow.

    So many times I’ve had companies say to me that “Our terms are 30 days – or 60 days – or whatever…” but I have negotiated exceptional terms that suit me and are more than fair for both parties.

    My business isn’t a bank, so why should I carry credit for other companies just because “that’s the way we’ve always done it”?

    No, we all have the opportunity to step up and get bolder and more commercially savvy about our terms of trade.

    Best, Robin

    • Banksy on 30th April 2010 at 2:16 pm

      Spot on Robin – I think many fledgling businesses (I’m including my own when I started) can be scared of asking for that payment because they feel the one or two customers they have are literally their lifeline. If you grow balls in the first place, it helps with best business practice later down the line.

      Thanks, as always, for commenting 🙂

      • Robin Dickinson on 30th April 2010 at 11:04 pm

        Thanks, Banksy.

        I would like to see more people really focus on these financial aspects *before* they start even trading. Commercially, it’s all about making money – period!

        You go to the bakery and they want the money now – not when you are organized enough, or remember to pay.

        Ask: ‘what cash-flow terms do I need to thrive (not survive)?’ – and then ‘how can I sell and negotiate to be sure to get it?’ – assuming your product/service is worth much more than you are asking for!

        Best, Robin 🙂

  5. Julian Summerhayes on 30th April 2010 at 1:35 pm


    The devil is in the detail. Unfortunately a lot of people don’t sweat the details in the beginning and it comes back to bite them later.

    One thing that is worth bearing in mind is that where trust is low speed goes down and where it is high speed goes up. Trust is at the heart of all good businesses; it would be nice to get businesses to pay up front or such like but I think as long as the payment terms are fair and are adhered to then both parties have the basis for a proper working relationship.


    • Banksy on 30th April 2010 at 2:21 pm

      Very true Julian, Optix (which you know) has over 400 clients now and as much as I’d love to tell you we can trust every single one to pay on time, it’s not quite the case and I’ve learnt that over the years (sometimes the hard way!). As you get more established its easier to spot the clients that could cause problems and perhaps we even have the luxury of chosing the ‘right fit’ type of client now.

      Anyone reading this, take note from Julian – Get it right at the beginning and suffer less later down the line – Key take away 🙂

      Thanks Julian

  6. Ann Holman on 30th April 2010 at 2:49 pm

    Great post Al. Timely especially as the economic situation is only going to make this worse over the next 18 months. Best to start protecting ourselves now.

    The best tip here, take 50% up front. Don’t rely on credit checks to make the decision, they are based on the past and aged debtors almost always become bad debtors like you say.

    Oh and get yourself a great debt collection agency. Its such a negative thing for you to do and you’re not an expert in it. Once a bad debt needs collecting, you concentrate on what you’re good at…the great clients and get them to do the nasty thing!

    True relationships are built on trust and respect both ways. If a client isn’t paying they are disrespecting you!



    • Banksy on 30th April 2010 at 7:06 pm

      Great reply Ann – Thank You.

      Your point on the collection agency is a good one too. If you want to put forward anynames for people please feel free too.

      • Robin Dickinson on 30th April 2010 at 10:59 pm

        Excellent, Ann.

        Trading terms are all part of your total value proposition – and legally enforceable.

        What’s the point of having ‘trust’ if the client is abusing it by abusing your terms?

        Robin 🙂

  7. Scott Gould on 30th April 2010 at 11:28 pm

    Great to see people doing what I do. 50% upfront. 5 days. Checking credit.

    Glad to know I’m on the right track.

    Good stuff Al – just please get a plugin so I can get the comments email to me!

  8. […] The sale ain’t made ‘til the bill is paid! – Putting together a policy on money and collecting it is essential to any business, large or […]

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