You Don’t Charge Guinea Pigs for the Drugs

“You are in charge of collecting the receivables,” Richard Brock told me.

“Why? I don’t want to be the collection department,” I objected.

He said, “Look. I sell and you deliver. If the customers aren’t paying, it is because you didn’t deliver. Therefore, it is not my job to collect the money; it’s yours.”

He was right, but I didn’t have to like it. I was in my early twenties and wasn’t really interested in adding this skill set to my resume. But I did it. It was important to the business since we needed the cash to survive. It was also an excellent unexpected learning experience.

I sought help from George Brown, a neighbor who sold moving boxes for a living. He always talked about collections. George was the most practical businessman I ever met. Everything he did made money. It was all about the cash for him. I asked George, “How do you collect the money people owe you?”

Best Collections Advice

He said, “I get them on the phone and say, ‘Did you get the boxes? Did you use the boxes? Pay me the money you owe me.’”

Simple yet effective advice. I used it on every collection call, and it worked except one time. I had a CPA client in New York City whose name oddly enough was Ted Beda (as in beta product). He and I worked long and hard over many months to get his small office system working. There were bugs in the software which just took time to correct. It drove me crazy trying to get it right and cost my client a lot of his personal time.

The $10K Lesson

Ted owed us $10,000, which was a meaningful amount of money to our little software house. When the software and hardware finally did what we originally told him it would do, I asked Ted for the money.

I said, “Ted, it has been close to eight months, but everything finally works and we have fulfilled the contract. It is time for you to pay us our ten grand.”

He said, “I’m not going to pay you. You need to write it off. And here’s why. You don’t charge the guinea pig for the drugs.”

What could I say? He was right. He negotiated the receivable down from ten to five. It was a business lesson I never forgot. You sell. You deliver. You get paid. If you don’t deliver, you don’t get paid.

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