This is one way to get clients to pay when you really need them to pay. In October one year, one of our Sydney clients, John Smith, contacted me. He was in trouble. He had a very successful coffee bean importing business. Only a few customers. About 25. But … each customer spent between $15,000 to over $100,000 with him. Every month!! John’s business turned over around 10–15 Million Dollars a year. The debt we’re talking about here was $90,000.
The trouble was, ABC was a very valuable customer. At $90,000 a month, or over one million dollars each year from this customer alone, John naturally didn’t want to upset them but he did want to, no, he had to get this customer to pay up very quickly. He had to, because his supplier, an overseas company, insisted that their bill to John was paid on time. If not, they’d simply cut off his supply. (John’s monthly bill from them at this time was around one million dollars)
* ABC was an international company and didn’t have to buy the raw coffee beans from John. They could get them elsewhere if John became ‘heavy’ with them when chasing his monthly account up for payment.
* The Accounts Payable person, Mary, at ABC wasn’t really concerned about paying John promptly – she had a “do what I can, when I can and if I feel like it” attitude.
* John simply didn’t believe her. (On previous occasions when ABC had been late, John had to almost beg Mary to pay his account so that he could meet his own, much larger, monthly commitment. She had paid each time before, just in time, but was now becoming impervious to his pleas.)
When John called me, his thoughts were to phone Mary and start begging again. If that didn’t work, to phone ABC’s owner. But he knew that he wouldn’t be comfortable speaking to the owner as the owner wasn’t an easy guy to talk to. He just wasn’t a very approachable guy. It’d probably develop into an argument. After all, John was genuinely upset that he was in this position. It wasn’t his fault. And besides that, John didn’t feel that ‘begging’ was the right way to go about it. It wasn’t. So I’ll tell you what we did do in a moment.
The truth is, John didn’t really know what to do. It was a Thursday and he had to have the money – the full $90,000 by Tuesday morning. He was desperate.
The Usual Option
Most people in this situation believe that a show of strength is the only option to take. A “heavy”, don’t you mess with me phone call to someone or
– a threatening letter from the boss,
– a Debt Collection Company or
– a Lawyer.
A personal visit wasn’t an option in this case (with ABC being in Melbourne and John in Sydney) and, anyway, that’d be a very confrontational approach. It would be out of the ordinary and, as such, embarrassing for all around. So … what would YOU do? Think about it for a moment. Once you know what you would do, read on.
We got John to go for the “Can you help me” approach. He wrote to the Owner of ABC. An email. A letter would take too long and a fax would be too ‘open’ for such a sensitive matter. (Anyone in ABC’s office might be able to read it – not desirable). This is the email that was sent on Thursday afternoon. It collected the $90,000 in 3 days!!
Dear (first name of ABC’s owner),
I’m sending you this email as our overseas suppliers recently reminded us that payment of their account must be made by the due date.
You are a very valuable customer of ours so I wouldn’t normally bother you about this but this reminder could have a very negative impact on
* our own cashflow and, ultimately,
* (if they insist on those terms) on product supply
if your account to us ever falls well over our trading terms.
At present, your latest account to us for $90,000 has fallen some xx days past the due date for payment and I’m unclear when we may expect settlement.
Can you help? I’d greatly appreciate any assistance at all.
Thanks, John Smith.
At 11.00am on Monday morning, John called me. A Direct Deposit of $90,000 had been made to his bank account that morning. Pleased? You betcha!
* No phone calls were made.
* Nothing else had to be done.
* The “Can you help me” approach had worked.
It normally does in these situations.
So, WHY did it work?
This is why it worked so well. Please note the principles involved.
1: It’s friendly and chatty and written by the owner of the creditors business to the owner of the debtors business,
2: It pumps up the ABC bosses ego,
3: It blames someone else (the overseas supplier) for having to chase the account,
4: It contains a very veiled implication (not a threat), and,
5: It doesn’t ask for payment anywhere – it asks for help.
So, Dear Reader, as Mary Poppins once sang ….
A lark! A spree! It’s very clear to see – that a
Spoonful of sugar helps the medicine go down.