When Life Gets Tough
Part Five: Getting Paid for Your Hard Work
By Adam Radzik
Consultant to Professional Firms

In desperate times people tend to do desperate things, and ethical behavior and integrity are often rationalized away.

I remember during the last recession that a client of mine, a sizeable public relations firm, called to tell me that one of his oldest clients, Ambizio Industries (fictitious name), sent him a letter suing him for unprofessional conduct. He thought it was a joke as his firm had always functioned in an honorable manner. When my client got the president of Ambizio Industries on the phone, the president informed him that when he had told his lawyer he was having cash flow problems, his lawyer responded by suggesting that he sue every one of his vendors. The lawyer assured him that most of the vendors would settle and the company would get the money it needed in short order.

The president followed up by saying that he had demanded $100,000 from each vendor, but because theirs had been a good relationship all the years, that he would agree to take $50,000 from him provided the check was received within three days. The PR firm was outraged and a two-year battle ensued, costing far more than the demanded sum.

The lesson in this true and offensive tale is that when pushed to the wall, people will resort to scandalous behavior. What this means is that we have to be vigilant—even extra vigilant—and better business people if we are going to survive this difficult trough.

First, let’s talk about credit. On the day that the relationship with a customer or client begins, a credit limit should be set. How much should it be? Not a penny more than what you can afford to lose if the business defaults on their obligations to you. Once the credit limit has been set and the expenditures are approaching the credit limit, a loud bell has to go off and all activity on behalf of that business must come to a grinding halt.

I can't tell you how many times I have come across huge, crippling receivables that will never be paid because the person working on the account kept reassuring the company that “He is good for it!” Too often this rationalization is being offered so that the owner of that account can continue to demonstrate his or her own busyness to his bosses at the expense of the company he or she is working for. The victimized company ends up losing hundreds of thousands and sometimes even millions of dollars. Don't allow this to happen to your company. 

I often ask the following question of business people, "If you owned a produce stand and a thief simply walked over, took an apple and walked away eating it but not paying for it, what would you do? I would chase him down they say. Well, when you let people steal your receivables he is backing up his truck and filling it with your entire produce stand and driving off without paying you a penny. Don't let people do this to you. Take a stand. By the way, after awhile the marketplace will find out if you can be taken.

The next issue is “I didn’t ask you to do X. I didn’t want you to do X. I am not paying for your doing X.” Always get the client to clearly authorize the work and to avoid costly write-downs. This can be a killer of profitability.

The final issue is the bill itself. The greater the cost, the greater the expectation that there will be a clear and detailed explanation of why there is a $17,000 item on the bill. I remember a client of mine receiving a bill from a major accounting firm for $89,000. The explanation provided was “for professional services rendered.” When I am asked to review bills before they go out, at least 90 percent of the time the work description is inadequate. This tends to make the customer suspicious. If it is going to be a very big bill, take the bill to the client’s office and review it with him or her. However, doing this involves confrontation and we like to avoid confrontation because it is unpleasant. But the price that will be paid when the client rejects the bill because it doesn’t make sense to them will be far more unpleasant and may very well precipitate the end of the relationship.

Be careful out there my friends, be very careful.

Comedy Corner

The mother of a 17-year-old girl was concerned that her daughter was becoming promiscuous.

Worried that the girl might become pregnant and adversely impact the family’s status, she consulted the family doctor who advised her to arrange for her daughter to be put on birth control, but until then to talk to her and give her a few condoms.

Later that evening, as her daughter was preparing for a date, the woman shared her concerns and offered the condoms. The girl burst out laughing and reached over to hug her mother, saying:

“Oh, Mom! You don’t have to worry about that! I’m dating Susan!”