Awkward conversations with people that owe you money

- November 19, 2013 3 MIN READ

I really am not a fan of invoicing clients, there is always a risk they won’t pay the bills on time and it’s going to fuck up my cash flow. To be honest the current media and advertising industry is a bit backwards and payments are only ever made once the campaign has been completed, it’s kind of a service based business and kind of not. It is what it is though, and that is why we have built some other solutions like a SaaS product that allows us to collect money up front to keep our cash flowing.

The problem is when you are a boot strapping startup and you are working tirelessly to get your idea off the ground, non-payers that owe you money do more than inconvenience you, they can in a lot of cases actually destroy your business.

You become a non-payer

I don’t know what is happening in the heads of people that don’t pay for the services they purchase, but I do know that non-payment can cause a horrible chain reaction causing you to fall behind on your own bills and responsibilities, affecting your reputation as a person and a business owner. It sucks. And debt breeds more debt. Between hunting for more business to cover the costs and politely reminding customers to pay up, startup business owners eventually end up reaching a moment where they are stressed to a point where they no longer can function properly.

I know, I have been there. Heck sometimes I still get to that point where you start to resent that person whom 30 days ago you could not wait to bring on board as a client.

Over the last year I have implemented many things to encourage clients to pay their bills on time, and to get that cash flowing through the door, things like rewarding them with a discount if they pay their bill on time, and sometimes it works, but in reality why should you have to discount your value in order to encourage someone to fulfil their end of an agreement upon which you have already delivered?

You shouldn’t.

Awkward Conversations

When someone doesn’t pay up, you need to speak up and those conversations are uncomfortable and awkward – but if you are serious about growing your business, they are conversations that need to be had. I have experienced these conversations from both sides, and the best way to handle them is by being extremely frank and honest.

For instance earlier this year my business went through a period of legal trouble which was costly and meant bleeding revenue for six months to cover everything and stop the business from being shut down, the first thing I did was contact all my creditors and explain the situation and made payment plans with all of them. I also froze all spending that was not vital to the business, I got my running costs down to around $1500 a month, because racking up debt when you’re paying people off is stupid.

The person in debt should always be the one to approach the person they owe money to and let them know what’s going on.

When it is the other way round and you have to approach the non-payer, as a business owner you need to be assertive. At first when approaching these situations I was quite blasé and mild about it, and this almost translates as feeling guilty about asking for what you are owed in exchange for your services. This approach only results in one thing – further delays.

The best approach I find is a face to face conversation, and in lieu of that an exchange over the phone. All you need to do is present the facts, I did “abc” for you and the agreement was “xyz” and then you need to give a timeline on when you expect the payment and stick to your guns. Sometimes making the situation awkward is the only way to make sure you get the result you are after.

If all else fails, send the boys around. (just kidding, sort of)