So you decided to own your own business as a locksmith… Great! You have customers, you have referrals, but you still seem to be in the negative with cash going out and not coming in. Sound familiar?
A locksmith, though you have many skills and training in your background, is still a business which means you need to follow the business rules. Here’s some ideas to help maintain your business, hopefully with a profit:
Taxes & Finance
Too many small business owners keep financial records just for tax purposes. But accurate and current financial records can be invaluable as you make business decisions. Take the time to organize and analyze your financial records. Don’t be afraid of the numbers. In order to successfully run your business, whether it’s a one-man shop, or if you have employees, you need to understand and use your business’s financial statements to have a profitable and growing business.
Educate yourself and improve your business skills. If you are not constantly improving yourself, you are falling behind. Analyze your strengths, your weaknesses, determine what areas you need to concentrate on improving and then take advantage of sources of assistance. There are seminars all over the country just for small business owners. Take to the web to search these companies out, or take classes at your local college or university.
Conduct a SWOT Analysis on your business. SWOT stands for Strengths (S), Weaknesses (W), Opportunities (O), and Threats (T). This analysis helps you define your business from all areas so you can then determine ways to capitalize on them. Identify your business’s weaknesses and then improve upon them. SWOT Analysis will also help you look for factors outside of your business to find opportunities in the market where you can expand.
Have you been offering your services as a locksmith and still are not being paid? Here’s some ideas:
1) Partial Payment in Advance
Ask for a deposit or retainer up front, even if it’s to cover the cost of the product. Charge for your services later. This is an increasingly common business practice for higher-ticket items and services. No reasonable customer should be offended by such a request.
If it’s a large job, break the entire bill into thirds. The first third of the bill is due before the work starts to help cover the cost of the product. The next third of the bill is due halfway through the project and the last third of the bill is due upon completion.
2) Invoice Promptly
Seems like a no brainer, but it’s amazing how many businesses that haven’t bothered to bill a customer in months. Not sending a bill quick gives the impression to the customer that your quality of work is poor.
A customer invoice should be prepared and presented immediately upon delivery of the service, especially for a quick job such as a lockout. Not providing an invoice immediately can make your business look indifferent to getting paid and slow down your cash flow for no reason. Waiting to prepare your invoice at the end the month will also add another thirty days to your cash flow.
3) Payment Terms Should be Clearly and Visibly Stated
If you want to be paid promptly, don’t leave it up to the customer to decide when they should pay your invoice. Customers should be used to having a due date if they have any bills (ie. Credit card bills, utility bills – they all have due dates). Rather than giving an invoice that is vague such as “Payable Upon Receipt”, state “Payable with 30 days” or better yet, “Due Date: ______”
4) Customers Who Pay Promptly Should Be Awarded
Advertising you will give a discount for paying their invoice early is a perfect carrot to dangle in front of the customer. It also helps get you your money faster. If your usual policy is to have payments received within 30 days, offer a small discount such as two percent to customers who pay within 14 days. Or, on the invoice, place two fees and clearly state them as an early payment fee versus a late fee such as:
$103.35 due February 1, 2012
$128.35 due after February 2, 2012
5) Establish a Follow-Up Procedure
It’s great to be paid in a timely manner. Unfortunately, not everyone can get paid consistently. You will still have customers who have overdue accounts. The more quickly you follow-up on a missed payment, the better your chance of getting paid. Set up a system for flagging late payments if you need to and set up a standard procedure for contacting the customer when his or her payment is late.
Usually, a procedure to follow-up begins with a letter that simply states a bill is overdue and requesting the customer’s immediate attention. If after a short time, the bill has still been ignored, then you will need to move to a series of collection letters expressing increasing concern. If you still do not receive a response, you are left with the choice of writing off the bill as bad debt or turning the account over to a collection agency.
There are many ways to contact the customer to collect the debt. Some ways are more effective than others. If time allows, start out with a phone call to “touch base” with the customer. You want to come across as friendly and polite, not threatening in any way. Sometimes the person just forgot to pay or misplaced the bill and a quick call is all it takes.
Sending a collection letter via email, if you have it, is nice because it automatically creates a copy of the collection letter for your files – and it also date stamps your message. However, your email to your customer can be flagged as spam or junk and they may never get it in the first place. Regular mail or a fax works as another choice.
6) Collection Agency
When all else fails, you will have to turn over the past due account to a collection agency. Collection agencies collect debts for a fee or percentage of the total amount owed. This fee is based on how old the debts are and how much business a creditor has to offer.
Collection agencies have experience with and knowledge about debt collection. Hiring one can be well worth it if the amount of outstanding accounts receivable warrants it.
7) Be Proactive
Proactive policies are the best way to get paid. Things such as having credit policies in place, performing credit checks on customers, having a partial payment policy, and being clear upfront about your payment expectations will go a long way toward ensuring your get paid.
© Copyright IDN, Inc.
Kathleen Kempf is the Marketing Manager at IDN-H. Hoffman.