I recently heard a story about a sole proprietor business owner with a fictional employee in his ‘accounts department’ named Tony. This fictional employee’s job is client-related administration, such as sending invoices, and following up on late client payments.
This is a clever separation between client accounts and client relationships.
Nothing kills a client relationship faster than a money issue. Even an unintentional mistake regarding money can quickly and irrevocably sour a relationship.
However, if you’ve just started a small services business, you’re probably doing both the billable work and the invoicing. All of your clients are critical during any stage of your business, but when you only have a couple, it’s even more important to ensure you have a strong relationship with your customers.
If the client has promised to pay you 30 days from your invoice date, and you absolutely need the client to pay on time to cover your rent, power and utilities, you’re suddenly in a very difficult situation 31 days after the invoice issue date.
If you contact the client directly about the late payment, suddenly you become the money-chaser. This will have a very real impact on your business relationships. In your clients eyes, suddenly you’ve undertaken a subtle shift from a trusted advisor, to a vendor. Some of your clients will understand the reality of cash flow in a small business. There are far more who won’t.
Don’t take the risk. Hire a general accounts person as quickly as you possibly can. Alternatively, you could designate a non-client facing member of staff to perform these tasks as part of their job.
If you’re unable to make this hire for whatever reason, another solution is to create an ‘accounts department’, even within your sole proprietor company. Sending emails from firstname.lastname@example.org keeps your own client relationships spotlessly clean and minty fresh.
Benefits of Having A Separate ‘Accounts Department’
Trains your clients to pay promptly
When you’re starting a new business, cash flow is king. In the infant stages of your business, a 2 week late payment could kill your business before you get off the ground. An email from your accounts department to your client, sent 1 day after the payment due date will help to ensure your clients pay attention to the due dates on your invoices.
Reduces likelihood of relationship problems
When your accounts department sends an assertive email about an invoice payment that is now 6 weeks late, you can walk through the client’s door without any awkwardness. Your accounting department is completely insulated from your own relationship with the client. As it should be.
When all of the correspondence comes from you, about all aspects of your business, you look small-time. Many established companies feel much better about dealing with service providers that have accounts departments.
Forces you to ‘package’ work, and delegate it
When you’re getting started with your business, the hardest thing to learn can be delegation. Following this advice forces you to define a chunk of work, and assign it to someone else. Even if this ‘accounts department’ is temporarily fictional. If you’re planning to scale out at all, this kind of delegation is a critical habit to learn.
Bonus Tech Tip
If you’re a PC user, create a separate Outlook profile for this function. This allows you to select your accounts department profile, and completely separate billing from your regular email.