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Dec 1, 1998 12:00 AM

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At last count, quick print shop owner Ron Rafferty had $5,000 in outstanding customer invoices, many of which were more than 60 days past due. He figures 50 percent of his clients are chronically late with payments.

'From what I understand a lot of printers are having the same problem,' says Rafferty of Rafferty Printing (Mercer, PA). 'I know a guy with a shop 20 miles from mine who has $12,000 out right now. I just think it's become the American Way--sign now, pay later. The problem is it's hard for a small business like mine to keep going while waiting and waiting on receivables. My vendors want to be paid on time, too.'

Getting paid on time is an ongoing struggle for quick printers across the country. Advice from veteran owners as well as industry consultants includes trying to prevent the problem at the outset with credit checks and a formal payment policy, shortening payment terms for delinquent clients, requiring jobs be pre-paid or paid upon receipt if payments are repeatedly late and charging more for subsequent work in exchange for extending credit.

'The whole point about collection is wishing doesn't make it so--you have to be proactive,' says industry consultant Bob Rosen. 'There is a process to it, involving rules, flexibility and plain old-fashioned judgment. It's not simply a matter of unilaterally deciding you want to be paid in 15 or 30 days. But you're not a public utility, either. You do not have to grant credit to everybody and you don't have to be endlessly patient with people.'

Rafferty admits that when he first opened shop three years ago with his wife, Becki, they didn't conduct credit checks or emphasize a strict payment policy. When the matter of unpaid accounts (past 30 days) first became a problem, they began sending out late notices and telephoning with reminders. Signs were hung in their shop about the need to pay on time. Eventually, they changed the terms of their invoices to Net:15, hoping people would pay in 30 days. Now they require some customers to pay 50 percent down upon ordering until their accounts are current.

'We're between a rock and a hard place,' says Rafferty. 'We don't want to bug clients too much because we don't want to lose the account. We just lost a large account by doing that. We called them after 30 days and no check. Two weeks later, we called them again. After calling them another time we got paid but haven't heard from them since.'

Jace Prejean, owner and founder of Bayou Printing & Graphics (Houma, LA), believes the issue of getting paid comes down to how a customer has been 'trained.'

'Quite often printers 'train' their customers to pay slowly by permitting them to do so,' he reasons. 'We make it clear to our new customers that credit is a courtesy. They must write us one check a month--it is not a loan. Our invoice says, 'Net due upon receipt.' This encourages people to pay immediately. When an invoice reaches 30 days, it is not due at that point--it is past due. Once 90 days have passed from the day the invoice is generated, unless we have a special arrangement with the client, our shop won't accept any more orders unless they are prepaid.'

Crucial to 'housebreaking' a new client, stresses Rosen, is presenting the shop's payment policy up front and in person.

'As part of taking a first-time order, you need to tell customers exactly what your credit terms are and then say something to the effect, 'I just want to make sure we have an understanding,' ' explains Rosen. 'You're not asking permission. You're not saying, 'Is that okay?' What you're looking for is a verbal acknowledgement that they're clear your terms are 15 days or 30 days. When one person says to another, 'Yes, I'm clear on that,' it has much more immediacy than simply receiving an invoice that says 'Net: 30 Days.' It's a magic thing. In effect, they've made you a promise.'

Don Garrett, owner of Garrett Printing & Graphics in Evansville, IN, says it takes courage to be firm with clients when they first walk through the door, but it pays off. At his shop, a credit application listing three references must be filled out by each new client.

'Some owners are so afraid of offending a potential customer, thinking it's somehow insulting to questions a person's financial integrity. I think that's poppycock,' says Garrett, who checks personal references as well as the client's bank. 'I'm never offended by a company asking me to fill out a credit application. People who are in business should expect this.'

Rosen suggests that anyone who bridles at a request for the names and numbers of a few people they've done business with is providing a 'guaranteed sign there's going to be a problem with collections-why else wouldn't someone give you that information?'

For the small shop owners who argue they're too busy to check a reference, Rosen counters, 'How long does it take to call someone eight times when they owe you money and they are trying to duck out? Calling to ask, 'Hey, what's Fred's payment pattern?' takes about 30 to 45 seconds.'

Of course, when the answer comes back that Fred has had some difficulty in the past making payments, a decision must be made.

While some owners say they still might take the job but require the client pre-pay, pay COD or pay 50 percent down upon ordering, at least during the initial stages of the relationship, Prejean advises giving the order back.

'Usually it's the owners who are willing to take those jobs who can least afford a customer going bad on them down the road,' he reasons. 'At my shop, even after their references check out, we require a personal guarantee on the order. That means if a company decides not to pay the bill, whoever signed for the job is responsible personally.'

Rosen stresses there is an important distinction to be made between credit problems and collection problems. 'For example, a school board or local school district might be creditworthy in the sense you know they have the money. It may be just harder to collect. Other people are just bad credit risks and are struggling to keep their heads above water.'

Garrett says he is sometimes willing to give overextended customers a special payment plan if they are sincere in their request.

'I once let a guy who was just getting a business off the ground owe me for over a year, but he assured me he would pay me and he did,' recalls Garrett, who says in his 17 years of business he's only lost about $250 in unrecovered invoices. 'I just think with a small business you can't always be hard and fast with rules.'

When it comes time for the shop to place a phone call reminding a customer of a past due account (with Net: 30 terms), Garrett does it himself.

'It's the owner's responsibility--you need to do it in a way that doesn't embarrass the person who owes you. You want to make it comfortable to pay,' says Garrett. 'The first phone call I make (usually after 45 days), is not a confrontational one at all. I try to make it light. The next time I use more authority. The third time it's, 'Charley, if I don't get my money by Monday I'm going to file in small claims court that same day.' '

John Baicy, owner of ImmediaPrint (Winston-Salem, NC) with his wife, Missy, agrees that owners must act as their own collection agency. 'Nobody will collect your money better than you will,' he says. 'In the early days, when we were desperate for every dime we could get, we would call customers on the 31st day after the date of the invoice. We trained clients to know we were the squeaky wheel that needed the grease.'

That's not to say the Baicys' are inflexible with their credit terms. 'If they're a good account and we want to keep doing business with them, but there's no way we're going to get paid in 30 days, we make them spell out to us why and what their terms have to be and on what day we can start calling them,' says John Baicy. 'If we make the determination that we want to keep someone who's a habitual 45 or 60 day payer, we'll start calling them on the 46th day or the 61st. The important thing is it's by our choice. It's not because we got weaseled into it.'

Baicy believes it's bad for business to insist on COD or Net:10 or Net:15, as some print shop owners do.

'Owners cut off their nose to spite their face with too tight of a credit policy,' he says. 'The type of customer who's willing to bring in a check every time they get a job is not the type of customer you want. The fact is there are a lot of large print buyers who will do everything in their power to get you paid, but, lo and behold, they don't have a lot of control once they've placed the order.'

Rick Foster, owner of JMJ Printing Co. (Snohomish, WA), figures if it's hard for his three-person shop to meet vendors' 10-day terms, how can he expect customers running small businesses to comply with such terms. 'We don't have a full-time bookkeeper/accountant to take care of this,' he explains. 'When we run into a vendor with Net:10 terms, I explain that any bill received after the first of the month will be paid on the last day of that same month because that is the day all bills are processed, checks cut and payments mailed out. Then I ask if this will be okay with them. I have not yet had one vendor tell me no. '

Foster recalls just one of several examples in which negotiating an accommodating payment plan for a customer has helped his business: 'A few years ago, one of my top five accounts was slipping further and further behind in payments. Once they hit 90 days, and we didn't hear from them regarding their account, we wrote a letter explaining how we would hate to lose them as a client, but that we were unable to carry our customers past a 30-day period.'

In the letter, the client was given the option of having the account frozen while agreeing to a payment plan that would clear the past due balance within 12 months. At the same time a new account would be opened with strict 30-day terms. Going over 30 days would result in COD status. Failure to make the monthly payment on time would result in an immediate halt to all work in progress, a penalty of 1.5 percent on past due amount and a requirement to pay the balance in full immediately to avoid court collection proceedings.

'Since taking us up on our offer, they have made every payment on time as well as staying current except for two times when they called in advance to explain their upcoming delay and when we could expect payment,' testifies Foster. 'They are no longer in the top five as far as sales go, but they are still a valuable customer with steady monthly projects and referrals to other business contacts.'

Ron Sardo, owner of Sugarloaf Print Shop (Sugarloaf, PA) has devised an 'incentive' plan that encourages habitually late customers to pay on time by making them think they are getting a bargain. The Sardos simply add five percent to the customer's invoice (or to the job quote) and then print on the invoice, 'If paid by (30 days after invoice is mailed), pay only (price before the five percent increase).'

For those customers who are 60 to 90 days past due and do not respond to Sardo's late notices, he requires 50 percent down upon ordering and the other 50 percent upon delivery.

'Usually when they give 50 percent up front they're going to come back for the rest,' he says. 'And if they're a crank about it, well, sometimes people like that are best to go to your competition--let them stay up nights.'