AMS works with dozens of companies and one of our most popular products is the AMS Rapid DiagnosticTM, a review of financial and accounting operations, policies and practices. We review the current situation from within a client’s finance and accounting department, and provide a roadmap to more successful operations.
One particular area of interest for most finance executives is cash flow, and payment policies can play a big role in positive cash flow. In addition to establishing your own payment policies and procedures (as detailed as how often you cut checks), you want to establish what is acceptable in terms of your expectation of payment. Different customers will have their own payment procedures. There are also a number of techniques that your organization can employ to make sure you are paid in a timely fashion, something that is a particular challenge for smaller organizations that may be working with larger companies.
Before you start work with a company, establish what your new client’s normal payment policy is. Explain your own policy and make sure there is agreement and understanding on both sides.
You will also want a signed agreement or engagement letter with your payment policy, detailing payments, late fees and interest rates on delayed payments. A signed contract is your first line of defense if there is any disagreement about payment. Like a prenuptial agreement, the challenge is always getting the partner to sign the agreement and still get to the altar. You need to stand firm on getting a signed contract without alienating the client contact.
Find your champion
A champion is someone within the client organization who acts on your behalf to get you paid. This may or may not be your regular client contact but it needs to be someone with sufficient authority who is willing to walk your invoice down to the payment department and get a check cut for you.
If you have already started work with a client and payment is an issue, you may need to establish a relationship directly with someone in the accounts payable department. This is also a good way to judge the effectiveness of your champion, if you have one. Have they been submitting your invoices? Do they have sufficient pull or authority within the organization to get a check cut?
Prepayments and Discounts
Some organizations are able to ask for full or partial payment up front. This is more common in some industries than others, yet there is always an option for pre-payment, especially with a new customer. Any kind of payment, whether a deposit, retainer or partial payment, can help establish you as an approved vendor. Furthermore, getting established on a pre-payment cycle may allow you to watch for early signs of trouble in the future.