As business owners, we’re busy people and must make every minute, and every dollar, count. We know that certain business goals are commendable, but often our efforts to see them through are worthless.
Here are 5 actions you shouldn’t take, and a better way to achieve the desired results.
1. Asking for something without any compensation
Want a referral? Want responses to your questionnaires? Merely asking for action likely will produce only a minimal response.
Better way: To receive a better response, offer compensation of some sort (e.g., a gift certificate, a future discount). Make the compensation commensurate with the effort that you’re asking for.
2. Charging customers for breakage
Signs such as “you break it, you buy it” warning your shoppers of their obligation to pay for items they accidentally damage or break may not be worth the paper they’re written on. To recover your loss, you’d have to sue and probably wouldn’t collect—an accident is merely a cost of doing business. Of course, if a remorseful customer offers to pay for the damage, accept it gladly.
Better way: Make sure your insurance provides adequate protection for such losses. Any losses not reimbursed by insurance can be deducted on your tax return.
3. Charging interest for late payments
If you send invoices for goods shipped or work performed and aren’t paid on time, you consider charging interest (e.g., putting a note on the invoice that there’s 1% late charge or such). But don’t bother because I’ve never heard of any customer paying the interest.
Better way: Get paid up front—via credit card, check, or cash—so you don’t have to wait for payment following an invoice.
4. Continuing in-house collection efforts
When a customer is late in paying a bill, you may resend an invoice and then follow up with a phone call or email. After a couple of efforts on your part, further hounding by you likely won’t induce payment.
Better way: Turn delinquent accounts receivable over to a collection agency. While you won’t get the full amount you’re owed (the agency keeps a percentage of what it collects), at least you increase the chances of getting some payment. Even better, follow the advice in #3 above so you’re not chasing customers for payment.
5. Failing to make good estimates
When you’re giving a quote for a job, you have to estimate how much time and materials you’ll need to complete it properly. But if you give a bad estimate—one that falls short of the actual costs for doing the job—customers perceive that you’ve been lying to them. You’ll wind up losing money or a customer, which is not your goal.
Better way: Bill by the hour instead of charging for the entire project so you know you’ll be properly compensated. If you must provide an estimate, then use software or apps designed for your industry to help you create a better, more accurate, estimate so that both you and your customer are satisfied.