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A few months ago I booked a new client who was referred by a CCFC consultant. Like many clients, this person has furthered my education in
the factoring industry. Most of the small clients I have teach me something, but compared to others, Alan has made a lasting impression. He has shown me how to handle one of the most important issues any factor, large or small,
needs to manage: getting paid.
Like most factors, I have had clients – more than I care to tell you – who have given me an education in how NOT to run my (or any) business. Those are the clients who want to bend the
rules, who cop payment checks and see nothing wrong with it, or who bounce from one crisis to another like the steel ball in a pinball machine. Such people are just not on top of running their business, let alone keeping track
of their receivables.
But Alan is. In fact, he is more than on top of his A/Rs – he’s all over them. Like a pit bull. When someone owes his money, he clamps his jaw on them and doesn’t let go.
Like most businesses
who factor, he provides 30 day terms to his customers. He runs a small company with a few employees, and his customers range from small businesses to large corporations that are household names. He spends a lot of time in the
field and pretty much runs his business from his cell phone. Yet he watches his receivable payments like a hawk, and if someone is late – even one of the big names – he swoops down on them and doesn’t tolerate any excuses.
His philosophy towards his customers is simple: “Before I work for you, we make an agreement. I do a job you need, and you pay me in 30 days. Then I do my job, and you pay when you agreed. If you don’t, I’m done working for
you.”
He is all over my aging reports like white is on paper. If he doesn’t get them when expected, he lets me know I’ve messed up. If someone doesn’t pay when an invoice is due, he lets them know they’ve messed up, and it better not happen again. He wants these aging reports because he wants to know who’s gone past 30 days, and he calls every single one at day 31. Then he reports back to me when they’re going to pay…which is invariably right away.
Is he mean? No. Is he pleasant? Well…not especially. But he is persistent and consistent, which are the keys to dependable, timely payments from creditworthy customers who take longer to pay than they
should. If a check is not received a few days after his first call, he calls back and lets them know 1) he hasn’t received payment and 2) he is not happy. So far, a check has always been received within two weeks of his first
call.
I’m sure the payables people know him all too well, and don’t want to talk to him. That provides excellent incentive for them to pay his bill right away when they receive it. I doubt his invoice goes to the bottom
of their stack, because they don’t want a phone call from Alan telling them to do their job. He’s not a horrible, nasty person; he just makes it very clear what the terms of his service are, and expects the customers to keep
their side of the agreement, just like he has. If they don’t, they’re done. Period.
For most small factors, collection calls (or whatever you choose to call them) are one of the less pleasant aspects of factoring. Yet
they absolutely cannot be overlooked. Your work as a small factor is made immeasurably easier when you have a client like Alan who is not only consistent about following up with slow payers, but tenacious.
I learned
some time ago not to rely on most clients to do follow up calls like these; they are too busy, it’s not a job they enjoy, and/or their personality is such that being hard-nosed with customers is not in their nature. They are
afraid of alienating a customer and losing the business. Most clients are usually more than happy to let you be their collections department, as long as you’re professional about it and don’t bully their customers. Professional
follow-up calls are one of the most important services you can offer as a small factor. It’s also one of the most important tasks you must constantly stay on top of, just like Alan does. Do you need to be nasty? No. Do you need
to be persistent and consistent? No question.
I like Alan’s approach. He’s direct, he lays it out in plain English, and he sticks by his guns. He’s confident enough in himself and his business to know if he drops one
customer because they don’t pay when they should, he’ll be able to find another business to replace them. And he does.
Alan’s collections are proactive, not reactive. Many clients wring their hands when customers are
slow to pay. They treat these customers with kid gloves, and almost apologize when they call a customer to see what’s happened to a payment that’s 30 or 45 days late. In many cases these hardworking people are being taken
advantage of by their customers, who use them as their personal bank. These hesitant clients are not in control of this part of their business.
Alan has provided the model I hold up to them when we talk about collection
efforts. I say, “You know, I have another client who is always paid in 45 days or less, and usually less.” The others are in awe and want to know his secret. “Simple,” I tell them. “Do what he does. Call every customer who hasn’t paid you at 35 days, and get the date when your check is going to be cut. If they don’t pay according to terms, stop working for them or put them on COD.”
Unfortunately many are reluctant to do this. They say they’re afraid of losing business or that a huge corporate customer will ignore them or won’t keep them as a vendor, which may occasionally be true. But I think more
often they just don’t want to take the time, or don’t want to seem like a hard nose. They’re too nice.
Unfortunately, when it comes to getting paid, being nice is often ineffective. Not that you have to be mean to get
paid; just persistent and consistent.
Like Alan, the pit bull -- who knows the secret of getting paid.
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Each issue we give away a free item from our catalog! Last issue Bill Jaffin
of Jaffin Financial Group in San Ramon, CA was the fifth person to respond and won a free copy of the 
This time, be the seventh person to email me at