We all want to believe that the majority of people we deal with are honest… and generally, most people are.

But when push comes to shove over money, relationships and trust can take a completely different meaning – even “good” friendships can quickly turned sour, as I found out to my cost.

But before I tell you about that, you need to understand that if you want to do the best you can for your clients and have a truly successful business, then you NEED to build up a solid relationship – you need to build trust.

If you want a business that will survive, DESPITE what the economy is doing, then not only do you need to do better than your competitors at supplying what your clients need, but you must build up trusting relationships with your clients AND your suppliers. They are, after all the ones responsible for getting you where you want to be.

The trouble is that when there is money involved, people have a tendency towards “self-preservation”, and any loyalty or friendship can fly out of the window.

Let me tell you a story which shows you exactly what I mean, and where I suffered because of it…

I was working with a direct marketing company as an associate doing some consultancy work,directly working with some of their clients. I had worked with this company on and off since 2001, had never had a problem with them before and they had a very good reputation – at least, I wasn’t aware of any problems.

The only slight hesitation I had was that they would only accept invoices with 30 day terms.

This is not how I usually operate with clients, but I weighed up what I had to gain by learning different approaches to marketing techniques and strategies, and decided it was worth doing.

Things started well, the end clients were happy, my client was happy and everything went quite smoothly – for the first 4 weeks. After I put my first invoice in, the first payment didn’t arrive.

When I started chasing for payment, after much apology, it arrived the following week.

As time went by, my invoices seemed to be issued faster than payments were being received – every time I chased the accounts department I went through a series of “He’s not this week” or “He’s due in next Tuesday or Wednesday” – phone messages were ignored and emails were left unanswered…

But even as I began to realise things must have been massively wrong, I wanted to believe the business owners, who I had the relationship with, were genuine people, and it was just a short falling of their accounts guy – he gave a very good impression of being inept.

How wrong I was…

Hindsight is a wonderful thing, and what I should have done was to stop doing any more work for them the moment any invoice went overdue, but in my case, things were made a little more awkward because I also didn’t want to let the end clients down, which put me in a very uncomfortable position.

So why am I telling you this, and why is it relevant to you?

There are two lessons to learn from this:

Firstly, you need to keep the business aspect of your working relationship distanced from your personal one. Make it clear from the outset what your payment terms are, make sure you have your collection process in place – and then STICK TO IT.

If you offer 30 day terms and you haven’t received payment by day 31, you should send your e-mail or make your phone call asking for payment.

It doesn’t matter who it is, or how well you get on with them, make sure you treat everyone the same and follow a system. There are benefits of doing this anyway – you improve your cash flow, you limit your chance of wasting any time on people who are unable (or unwilling) to pay you, and you actually strengthen your relationship because you stand a chance of actually keeping it longer!

If you feel uncomfortable chasing clients for money, then give the job to someone else – either one of your employees, or find someone external to your business who can handle it for you.

Another option, particularly if you offer a service, is to look at staged payment in advance. This can either be by way of a monthly fee, or a percentage of a total project cost, but at least you get a commitment from you client as well as getting renumeration for the work you have done as you go along.

Whatever you do, don’t make the mistake of assuming that because you get on well with the person, even though things might be tough at the moment, there is no chance of them trying to screw you over. When it comes down to the crunch, self-preservation will step in.

The second lesson is that when a client makes a conscious decision to travel down the route of not paying you, chances are you’ll find that their morals evaporate at about the same time.

In my case the direct marketing company called in the liquidators, closed the business and in less than a week had a new business up and running (under a new name of course) but to all intents and purposes they were offering the same service, to the same clients as if nothing had ever happened…

… but obviously without the debt or any legal requirement to honour it.

It has always been important to keep an eye on your cashflow, payments and profitability – even more so in the uncertainty of our current economic climate – but that doesn’t mean that you should view every client with suspicion. Trust is an integral part of growing a good relationship with your clients, and a solid long-term business.

You just need to be aware of what can happen.

Now – on a more cheery note – onwards…

… to a happy and prosperous New Year!

Jez

P.S. If you don’t already have a formal debt recovery process in place, then I suggest you organise one as a matter of priority. Remember, you don’t have to do the chasing yourself – you can always get someone else to do it for you or you can look at factoring or a third party debt collection agency – one type of business probably set to grow over the following 12 months.