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Written by Richard Weisgrau
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Saturday, 05 May 2007 |
 Originally published as Chapter 13, in the book titled The Real Business of Photography , Allworth Press, NY ISBN 158115-350-3
Collection System
The likelihood of being paid is enhanced by good systems. You have read
about the types of problems that cause tardy payment and how to remedy
them. Above, you have a simple policy to follow in deciding when to
begin collection action. Now you need to begin the process. Collecting
money can be quite aggravating to both the late payer and the collector.
Photographers don’t like to push clients and clients don’t like to be pushed. Still you have to be paid so the system I am recommending starts out with very friendly reminders, which become progressively harder in tone. If you get to the end of the process, you are probably not going to have this client any longer. But you don’t need clients that you have to take to the mat to get paid. Collecting money takes time, and time is money, your money. You don’t want to waste it on deadbeat clients.
Like all good collection systems this one is based on a timeline that is relative to the general value of overdue invoices. If you were being evaluated for a business loan, the lender would require a copy of your balance sheet to see what your accounts receivables amounted to. It would also probably require you to “age” the receivables. Lenders know that the longer overdue an invoice is the less likely it is to ever be paid. When receivables are “aged” they are broken down into categories and assigned a relative value. Different lenders use different evaluation methods. This is the one that my bank uses.
Age of Receivable Asset Value
Up to 30 days 100%
31 to 60 days 60%
61 to 90 days 30%
Over 90 days No value
Aging policies of lenders tell you how fast you ought to collect your money. And they provide the basis for a timeline for collection action. You don’t want to let invoices go unpaid for more than sixty days.
Below, in figure 31, is a chart with a collection task list and timeline. This can easily be set up by hand or by computer. An efficient way to do it is in a spreadsheet program because formulas can be used to calculate the task dates automatically. But, no matter how you do it, make certain that you do it.
Client: Cumulus Cloud Advertising Job Reference Number: P.O. # 12345
Aged Days
| Action/Date
| Advanced due date | 0
| 1st Invoice date / September 12 | October 12 (30 days) | 35
| 2nd Invoice date / October 17 | October 27 (10 days) | 40
| Telephone call / October 22 | | 48
| 1st Letter / October 30
| Immediate | 58
| 2nd Letter / November 9 | Immediate | 72
| Final Action / November 23 | |
The First Invoice date is the date you send the invoice to the client, so be certain to send it on the date you construct it. It should clearly state in large letters: Payment due by (insert due date). People ignore messages like payment due in thirty days. The client set a specific deadline by date for you. Return the favor.
The Second Invoice date is five days after the payment due date to allow for tardy mail delivery. It allows ten days from its date for payment. This invoice should be clearly distinguishable from the first invoice. The best way to do that is to clearly state in large letters (red letters are best): Second Invoice Payment Overdue Payment must be received by (insert date).
Go to Part 6
(c) 2004 Richard Weisgrau [contact] [bio]
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Last Updated ( Saturday, 12 May 2007 )
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