Years ago I was a business coach for a cosmetic surgeon to help her grow her business. During our initial evaluation and coaching session she told me that she needed some help getting her books caught up. As I dove into this a little more, I discovered that she was owed just over $120,000 from patients she had provided service to over the past four months. As her business coach, I asked her why she hadn’t collected the money and she said, “People never pay me, which is why this profession is so frustrating.”
Although I could truly empathize with her because I once acted the same way she did, I said, “Doc, this has got to stop. You are not a casual bank; you must collect the money people owe you ASAP. Who currently is in charge of collecting this money?”
The doctor went on to explain to me that her bookkeeper was in charge of collecting the money that was owed to her from patients. Having met this bookkeeper, I can tell you that she was truly a nice person, but she was also extremely passive. Whenever a passive person is in charge of collecting the money, bad things happen.
I worked with the doctor to create a four-week business coach plan to collect as much money as soon as possible because once money is owed to a business beyond a certain number of days, the law will no longer side with you if you have not attempted to collect. I explained to the doctor that my goal was to collect as much as possible of the $430,000 that was owed to her, including the $120,000 that was owed to her from service provided over the past four months.
Week 1 involved the doctor personally making a follow-up call to each patient to check on them and see if they were happy with their results before kindly asking how they wanted to make their final payment. Did they want to pay over the phone via check, cash, or debit card?
Week 2 involved the doctor sending a thoughtful and kind follow-up letter thanking the patient for their business and asking if they would kindly call in at their earliest convenience to pay the balance via check, cash or debit card.
Week 3 involved sending another letter that was more firm in its tone and placing another follow-up call to make sure that the patient was happy with the results and then asking if the patient preferred to pay over the phone via check, credit, or debit card.
Week 4 involved sending a strong message delivered via certified mail stating that the medical practice would unfortunately have to take legal action against the patient if the final balance or at least half of the balance was not paid within 30 days.
By applying this simple business coach system, we were able to collect almost 40% of the total $430,000 that was owed. This blew the doctor’s mind! After hugs were exchanged I asked her, “So if you had to describe the reason that most of your people were not paying, what would it be?” What she said would have blown my mind were it not for the fact that it was the same answer I constantly hear from business owners. She said, “Well, it turns out that many of my patients never received a final bill or a follow-up call to let them know that their final balance was due. So about half of the people had never received a bill. The other half didn’t seem to know when their money was due and told me that they would gladly pay their bill as soon as they got paid or within the next 30 days. I really only had two people get upset who said that they didn’t realize that the procedure was going to cost so much, which is weird because I know I have every patient sign off on the final expenses before we do any procedure.”
I wish I could tell you that this doctor was able to collect all of the money, but that was not the case. However, she was able to collect nearly 65% of the money that was owed to her and much of the money had been owed to her for over nine months. Today, I can tell you that this doctor now collects nearly 95% of all of the money owed her because she has proactively implemented all of the SUPER MOVES I am teaching you.
If you are a business owner and you have not yet personally experienced the high costs associated with not collecting the money that is owed to you, you are a rare bird and I want to congratulate you. For everybody else, let’s fix this problem before it compounds as your business grows.
When I see a business struggling with their cash flow yet they have good sales, their problems typically stem from a poor collections system. I have found that by simply focusing on collections, most business owners can generally give themselves a raise in their gross collected revenue by as much as 10% to 20% within 60 days. I don’t know if this gets you excited or not, but it should. IF YOU OWN A BUSINESS THAT OPERATES AT A 30% PROFIT MARGIN AND YOU LET TWO CUSTOMERS NOT PAY YOU, THEN YOU JUST LOSS THE PROFIT FROM YOUR NEXT THREE CUSTOMERS. DON’T LET THIS HAPPEN.
Over the years as a business coach, I’ve helped hundreds of people to turn their financial situation completely around and into an abundantly profitable situation simply by helping the client kill the concept of invoicing and collecting payment later. Consider charging your clients a percentage up front as a retainer or initial payment and then charge the customer the final balance right as the work, product, or service is being delivered.
As a business coach, I worked with one particular client, an attorney, who was just getting killed financially. I told him that if I was him, henceforth I would tell the customer what the fees are going to be and require them to pay a 50% retainer before the legal work can begin. The customer would appreciate knowing the estimated total of the legal fees before the project started and the attorney would appreciate no longer having to mail invoices, call about collecting the payments, or even worry about hiring a person responsible for those duties. Don’t freak out. This system didn’t result in this man firing his assistant. Because this assistant was no longer spending her entire day making collection calls and invoicing people, she was now able to focus 80% of her time helping her boss market his business. My team and I did a deep dive training with her to teach her how to master search engine optimization and online-marketing. I just spoke with this attorney about three weeks ago and he now is making a boatload of money, he works less, and he never has to go after people to collect money, all because he killed the concept of invoicing and collecting later. As a side note, I have used this super move to dramatically help contractors, landscapers, dentists and nearly every kind of company under the sun to solve their cash flow problems.
Just yesterday, we unfortunately had to punt a client because he was behind on his men’s grooming membership at the Elephant in the Room. Because the Elephant in the Room business model is a membership-based model, we charge our customers a recurring amount to allow them to enjoy our facility and the services we provide more often and at a discounted rate. This is a good thing for most men because they never have to wait for service; we keep them on schedule with a recurring appointment to help them maintain their look. Unfortunately, this man kept having his credit card declined but still showed up for his monthly haircuts. Because we keep track of who has paid and who has not paid, we were able to discreetly inform him the next time he came in that we would not be able to cut his hair unless he paid us for last month’s haircut and this haircut. He started immediately getting loud and name-calling. Because we track each account, we knew that he had previously attempted to not pay for our service after yelling at a stylist. Armed with this knowledge, we asked him to leave and he did. I’m sure he is writing a bad review about us on Google right now.
Listen to a business coach, collections is the process of retrieving the money THAT IS ALREADY OWED TO YOU! This means that there is no additional sales process or fulfillment that must be done. Simply, the business owner or collections agent has to go get the money that is owed from the customer. Not collecting the money that is owed to you is one of the most mind-boggling things people do. If you are guilty of this, we want to make sure that we help you fix the systems that have created a large number of accounts receivable. Effective collections can breathe life into a company. This must be a top priority for all business owners around the world.