Life Lessons from the Toilet

One of my favourite business authors is Mike Michalowicz. I was re-reading his first published book, The Toilet Paper Entrepreneur, today and in the first chapter I came across something that really struck me.

Mike’s parable starts with being stuck in a toilet with only three sheets of toilet paper left. With these very limited resources our innovation and imagination kicks in to ensure that we leave the toilet with our bums clean and our honour intact. The same thing applies when we start out in our businesses. We use our imagination and innovation to make a short amount of resources (i.e. US) to stretch a long way (across every area of our business).

How does this affect me? Mike’s story goes on to say that we very quickly go back to a situation where we don’t check that the toilet paper is stocked before we sit down in what he calls “a careless perception of perpetual abundance”.

I have fallen into that trap where I am so busy with work and clients that I have a “careless perception” that my bank account will reflect said work with “perpetual abundance”. Then I check my bank account and it is the equivalent of having three sheets of toilet paper. I have forgotten step one of being self employed – make sure you get paid! (As a side note, I am actually very good at chasing payment for my clients to make sure they get paid.) 

So my survival skills kicked in and I looked at ways to structure my processes to make sure I can afford to grab myself a bottle of wine on the way home Friday. Here are my top tips for helping you (and me) get paid on time.

Step 1. INVOICE YOUR CUSTOMER – as a bookkeeper I have processed invoices that are dated a month ago but my clients have just received it and the supplier is on the phone asking when payment will be. Hmmmm – sometime after I have processed it and usually on the terms originally stated from the date the invoice was RECEIVED. Your failure to invoice is not my emergency.

Step 2. SEND A REMINDER – Actually send several. Send a reminder that the invoice is due in xx days, then send a reminder on the day due. If payment is not received, send a reminder a week overdue and then again at two weeks overdue.  A lot of the accounting software available now can automate this process for you so you don’t even have to remember to do it. Hopefully, your customers will be sick of your emails and pay you to make you go away. The squeaky wheel gets fixed.

Step 3. SIMPLIFY PAYMENTS – Gone are the days of cheques and bank deposits. There are so many options for payments with so much available online and directly through your accounting software. You are able to setup direct debits, credit card payments or payments via PayPal through your invoices so that your customer can simply click on the link in your emailed invoice and pay immediately. At least that’s what you want them to do so make it as easy as possible for them.

Step 4. TALK TO THEM – If they aren’t responding to your constant emails and you still haven’t been paid, then give them a quick call. We are all busy and payments can be overlooked but I have found it is much harder to ignore someone who is actually talking to you. You can delete an email but it’s pretty rude to hang up on a person (unless they are a scammer threatening legal action from the ATO). NB : Remember at all times to be polite and professional – these people are your best referrals for more business and you don’t want to treat them like the unwanted scammer.

Step 5. FINAL REMINDERS – Before you head off to Small Claims Court and/or ranting about said customer’s failure to pay their bills and face a slander lawsuit, your next step is a Letter of Demand. This is the first formal step in the debt recovery process and puts the customer on notice that you intend to take the matter if they do not pay. There are specific details that need to be included in this letter. The Department of Industry, Innovation and Science has more information on the process and sample templates at www.business.gov.au/people/disputes/how-to-write-a-letter-of-demand.

If asking your customers for the money they owe you scares you, outsource it. A good bookkeeper can monitor your invoicing and payments, help you research the best payment options for your business, setup those reminders and make the uncomfortable phone calls. They can also help you maintain business relationships by putting a step in between your working relationship and chasing money. And now that I have taken my own advice and setup my payment options and automatic reminders, I am going to go enjoy that wine.