As a former Sales Manager and General Manager of a publicly traded radio company, I became well-versed in the art of, “Not Getting Screwed” financially.
You see, the standard payment terms for radio advertising are anywhere from 30-90 days. But unless you have a clear set of guidelines for how to proceed when clients haven’t paid their advertising bills, it’s pretty easy to find yourself in several sticky situations.
Like the time when my new client was all super-friendly and communicative through day 65 – but he mysteriously stopped answering the phone shortly thereafter. When I dropped by for an unscheduled, in-person visit, I received one of the biggest kicks in the gut I’d ever experienced…
The sign on the door said, “Out of Business.”
Despite my confusion, shock and dismay, something told me to stop into the business next door to see if I could learn anything. When I asked about their former neighbor, without hesitating, the guy behind the counter looked up at me and said, “Do they owe you money too?”
Yup. Nearly $10,000.
Apparently, they left in the middle of the night without paying rent, utilities, or advertising schmucks like me. I was financially screwed – and there was nothing I could do about it.
It wasn’t the last time I had a client who walked away without paying their bill – But it was the last time I lost that much money in the process. Why? Because I decided I was going to figure out a way to keep it from ever happening again.
Fast forward to today.
As a business coach and entrepreneur in the Hemp space, I see WAAAAAY too many Hemp businesses in the exact same predicament. Businesses who don’t have strong grasp on their financial systems for collecting and/or processing payments, run the risk of getting screwed way more often than normal. Trouble is, it’s not only bad for the business – it ends up giving the whole industry a bad rap in general.
Therefore, in an effort to help you streamline your collections strategies and see more revenue in your bank account, here’s my Top Tips for Financial Success:
1. Require Payment Up-Front Until Terms can be Established
When working with a new business relationship, it’s just good business sense to ask for payment up-front for a certain amount of time. Once your new client has established 60 to 90 days of an up-front payment record with your company, they can graduate into receiving credit terms. It’s an easy policy to explain, it allows the customer to develop good habits, and to be honest – it’s awfully hard to fake someone out over 90 days. If your client consistently pays you on-time for 3 months (and they’re satisfied with your services), it’s much easier to believe they’re going to continue to pay their bills with you moving forward. Establish an up-front payment strategy for a designated period of time with all new customers and watch your collections efforts become much easier in the long run.
2. Set Your Systems and Look at Your Receivables Often
The best business owners I know keep up with their receivables on a weekly basis. You have to see what money has come in and what money is still missing, in order to get an accurate picture of the revenue you’ve generated. In addition, your company should have an in-house system for invoicing clients on the same day of every month. Doesn’t matter if it’s email, snail mail, or both – Make sure you’re sending outstanding invoices to your clients with predictability each month. For example, if you send paper invoices on the 5th, and you still haven’t been paid by the 20th, the client may receive an email with an updated invoice on the 20th. You also have to establish what happens if your client doesn’t pay you by the end of the month – and who is the person responsible for collecting payments from each client. Oh – And here’s a quick systems side-note… Don’t you dare pay anyone commissions or bonuses on what they’ve SOLD – Only pay them on what they’ve COLLECTED. That includes YOU. Change your internal systems to paying out bonuses/incentives based on collections rather than signed contracts and watch your receivables increase nearly over-night.
3. Take it Out of Their Hands
Have you ever noticed that most Cannabis entrepreneurs weren’t Economics majors in college? Even fewer have MBA’s or a background working in accounts receivables. That’s because people who are bold enough to believe they can start a successful Hemp business are usually “Adventure People!” – rather than natural-born bean-counters. That means, the quicker you can streamline the financial details of your business relationship with them, the more they’re going to love and appreciate you. Therefore – why not get a credit card authorization or EFT details up-front and establish permission to charge their card/withdraw funds at the agreed upon time (maybe a weekly or monthly basis). It’s SO MUCH EASIER for you as the vendor, to step in and say, “Let me take care of this for you” through a recurring credit card authorization. By doing so, you’re more likely to get paid – and your customer is grateful for one less thing to remember. A win-win for everyone.
4. Offer Professional, Consistent, Kind Communication
Very few business owners are purposefully trying to screw you out of money. Rather, many of them are spinning 47 plates in the air at one time, trying to keep everything afloat! Firm, but kind reminders of their outstanding invoices with you, will often go further than elaborate, bold-font email messages or voice-mail threats of collections. Think about it. People pay people they like and respect. Being consistent with your communication, and offering a professional tone without additional emotion, will go a long way in getting your invoices taken care of quickly. Even asking the client if there’s an easier way for you to help them in this area, is a way of professionally communicating with kindness. Remind the customer that you’re there to serve them, more often than you remind them of the money they owe you – and you’ll be set.
And that, my friends, are my Top Tips for not getting screwed financially in your own business. Remember, when you set the tone up-front, and establish your systems for how clients are going to pay you, it creates a new level of professionalism for you and your company. And when you see your cash-flow increase because of these new in-house rules and guidelines, you’ll never find yourself sneaking away from your vendors in the middle of the night, writing signs that say, “Out of Business.”
Until next time,
Carrie Cox
The Hemp Business Advisors