This week I had the unenviable task of firing one of my clients. The decision to let this client go was not an easy one, it really goes against the grain of any business, after all we are here to attract clients not to get rid of them. But there are times when you have to make hard decisions which are in the best interest for your business and this week was one of them.
Let me give you a little bit of background. We provide a business to business service, our clients provide us with audio which we transcribe into text and give back to them in the form of a text document. When we sign up a new client, each receives and is required to sign, our terms of service agreement. This does exactly what it says on the box, it defines our terms of service, this is how we work and this is how our business functions. By signing, the client agrees to stick to our terms. Important for every business is cash flow and because of that we have, clearly defined in our terms of service, 7 day terms on our invoices. Why so short? Well remember we are supplying a service, a service which requires real people who are paid a real wage. We don’t ship something from a distributor who we have 30 days plus to pay for goods we have on-sold, we have real people who are paid weekly. Our staff work extremely hard, transcription is a skilled profession. My business works hard to create accurate documents in a very short time frame. Typically if you send us audio, say a 45 minute interview, we will have that audio transcribed and proofread and back to you within 24 hours. We require payment for a fast service within 7 days of invoice, after all, the service being paid for is supplied within 24 hours.
This is where sometimes problems can arise and arise they did with the client who has sadly departed. We tend to have long ongoing relationships with all of our clients and because of that we see patterns of behaviour for all clients. Some clients habitually pay late, a gentle nudge from our Rottweiler of an accounts person and payment appears the next day. But very occasionally a client slips with their payments and no matter how much barking from the accounts lady nothing happens. In fact a sign we have noticed is that clients become agitated, “why are you ringing again”, “I told you it will be paid tomorrow” are typical responses and of course tomorrow comes and goes with no payment. “We will have to take our business elsewhere” was the final comment made by this client, there have to be times when you have to agree and allow the client to do just that, their overdue accounts can then be somebody elses problem. It is at this point that your client will realise just how good your service is and regret that move.
In our terms of service we indicate that overdue accounts will result in the delay in transcription. We have to, unpaid bills are a risk to our business and our cashflow. We are not ogres, we know what it is like to run a business and we are flexible. If a client picks up the phone and says that 7 day terms are not viable but 21 days are, we are happy to amend the terms as long as payment does appear when agreed. In the “client that shall not be named case”, we became flexible and extended the terms. Then suddenly a payment for only one of the two vastly overdue invoices came in promptly followed by some audio files to be transcribed. This puts us in a predicament, the client has paid some of the overdue amount, should we go ahead and transcribe the audio they have just sent? This is where alot of businesses, in my opinion make the fatal mistake. A part payment is made, continue work for the client – you have to stick to your procedures in cases like this, money is still owed, money is still overdue, as per the terms of service agreed, to them work will stop until due payment is made. We implemented this rule for the particular client and did not process the incoming work. The second invoice still remains unpaid and overdue.
It may seem harsh, it may seem hard to do, but in any business you cannot carry clients who use your service but fail to pay their bills in the allotted time agreed to when the business partnership was made. I cannot stress enough the importance of a good terms of service agreement, our agreement won us a court case which I will talk about in a future blog post.
Great post Annalisa, I would add below (basically a summary of above with some extras):
Keys ways to ensure your service of agreement are being adhered to: