Ask a business owner when a sale is a sale and the answer you will most commonly hear in response is: Once the product has been delivered – or – Once the work is done.
And indeed that is the most common response because it is also the most practical.
So the process normally proceeds as follows:
- Product is delivered / work is completed
- Invoice sent
- Wait for payment on invoice
- If there is an incomplete order or dispute – it is usually addressed via a telephone conversation about the issue or simply short paying the invoice
But what happens when the nature of the issue is such that it cannot be readily verified or substantiated? In most cases merely another simple answer – work it out best you are able with your customer.
There are some situations, however, where this common business practice of just “working it out” may lead to imprudent risk taking on the part of the service / product provider. We highlight the following situations where we commonly see business owners taking on excessive risk (to make the sale we are told) – and in the process, potentially assuming greater than prudent risk of not be paid properly. These may seem fairly obvious, but we see them ignored or minimized frequently:
- A first time or new customer
- Existing customer, but unusually large amount
- Larger orders (certainly above 20% of monthly sales)
- Performance based services that may be difficult to establish, after the fact, that the work was done properly (cleaning and repairing on a performance basis are notable examples)
If one or more of these situations exists, we encourage (and in many cases insist) that our clients have the customer sign off in writing at the time (and before or coincident with invoicing) that the work was completed or the product was delivered. This can often be accomplished any number of ways – simply signing an authorization statement on the invoice, signing a more formal acceptance letter, responding to a confirming email – or several other methods.
While we understand that instituting a confirming procedure into the business process may seem outside of the “ordinary course”, it is actually quite and common – and importantly – a prudent business practice to implement when the risk of not be paid properly could cause material harm. Making the sale is important. Getting paid for the sale is more important.