Money – manage it or lose it!

Content provided by a guest contributor.

When you mention the “M” word these days you can see many SME owners tensing up – the body language immediately gives you feedback that here is an area many wish a magic fairy would resolve. So this article is all about helping you to take responsibility for a core factor in the success of your business.

Many SMEs are unsure of how to collect outstanding payments. This situation has very clearly been aggravated by the recession the past year. In the good old days, a client would have an account and mostly settle it without problems when the monies were due.

In the past you could go on someone’s word that he would pay you. These days many people are postponing the inevitable payment 'til they cannot do so any more. Or they are “robbing Peter to pay Paul”.

Every SME owner needs to ensure that they become more professional in the collection of monies due to them. By doing this they will be able to continue to pay their employees and minimise future problems. In fact, from the first contact you have with a client, it needs to be very clear that you will be intolerant of non- or poor payment.

You are running a business and with fixed overheads that need to be covered. You need to be clear that you are not there to accommodate your clients’ financial practices or problems. The successful SME owner have a no-nonsense approach toward monies due to them.

Here are some ideas you can explore on how you can establish a solid basis and manage the process further. The steps I have set out may not be totally applicable to your core business, but the principles remain the same.

Basic documentation

  1. Your initial quote or contract needs to establish the basis from which you are going to manage payments. So your quote must be in writing and include the method of payment e.g.:
    1. 50% payment upfront
    2. Remaining % payment linked to actual delivery of services as well as the time period in which the payment needs to be made by the client eg 7 days within being invoiced
    3. Last 10-15% payment upon completion, also stating the number of days in which the client needs to settle
  2. The quote or contract needs to be signed by the client prior to you commencing the job. This serves as an indication that they not only accept the quote but the payment terms as well.
  3. The quote/contract needs to state that the materials remain the property of the contractor 'til the client has paid in full for services rendered.

Managing the process

This is the crucial part of the process and needs to be followed through to the letter by either yourself or someone else in your business. Often it is easier to have a second party to follow through with this, as some clients are skilled at coming up with excuses as to why they are unable to pay and to play on your emotions or good will. And you may soften up to their “story” but to your detriment!

  1. Do not even start the work till you have received the full 50% down payment. Feel free to send sms/email reminders indicating you are still awaiting the deposit.
  2. Fax, sms or email the client when the next payment is due – preferably follow up with a formal invoice.
  3. Stop further work till you have received the FULL payment for the work completed. If the client fails to give you the full amount and promises to pay later, do NOT go ahead. If you are going to be soft for whatever reason, you are colluding and supporting the client’s poor payment practices.

Old debt

If you have monies outstanding from the past you can use the following approach.

Write the client a letter stating in detail what monies are outstanding. Indicate the name of each job, date completed and monies due. Request that the client give you an indication in writing by a certain deadline, as to how they intend settling the amount.

If the client fails to respond or misses the first 2 repayments, you may need to give them an indication that you intend handing the matter over to an attorney. If the client calls you to indicate how they will pay you – follow up with a summary of your discussion in writing stating that unless they respond in writing, this summary will stand.

Some important principles

Your initial expectations about the payment process needs to be in writing. Unless you follow up on a regular basis you lay yourself open for poor payment practices. As soon as you find the client “slipping” you need to escalate your follow up and consider stronger action e.g. getting the client to commit in writing to a repayment schedule.

You need to manage the whole process in writing – this will ensure that if you ever need to get a legal opinion, which will hopefully not be necessary, you have done the bulk of the work and will not need to pay an attorney for something you could have done i.e. keeping accurate and complete written records!

Drop me an email and let me know how you have managed!

The content in this article was provided by Linda Germishuizen - Clinical and Industrial Psychologist, and founder of PsychMastery.

About PsychMastery:

I founded PsychMastery because I understand that being human can be quite a daunting journey. We  live in a world that is changing rapidly. As a result the demands on us are significant. Without even realising it you can find yourself on a path that is so far removed from who you truly are. Or where you want to be. Unless you are aware of what is happening to you, the demands of life may dictate where you will end up. And when you wake up to the reality, years have passed by.

I observe how disconnected people are or feel. Either they are caught up on this ever moving treadmill coping in unhelpful ways. Or they are questioning whether this is what life is about. So many people seem to have lost touch with the essence of who they are beneath all the masks and defenses.

PsychMastery enables you to reconnect with the essence of who you are. I also help you to bring deeper meaning back into your life through the use of sacred ceremony. In this way, you will feel that there is divine presence guiding you. You will also feel a greater degree of community with the important people in your life.

For more information, contact:


Tel: 082 467 3214


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