Many in skilled professions, including the drilling industry, go into business for themselves. They are knowledgeable, reliable, and do excellent work. But many of them still fail. What are they doing wrong?
The “business” side of the drilling business tends to trip up many entrepreneurs, especially when it comes to accounts receivable. No one likes to ask for money, but it has to be done if the company is to continue providing services. Here are six steps to keeping your drilling business in business.
- Set expectations: Customers need to know when to expect invoices, when payments are due, and the consequences of late payments. Keep it consistent and make it known up front and the process will run more smoothly.
- Don’t waste time: Call the customer right away to ensure there isn’t a problem with the service or product. Sometimes it’s as simple as an overlooked invoice. If the customer is having cash flow troubles, extended terms could be offered.
- Understand procedures: Every company does things differently, so adjusting invoice timing or payment terms to align with the customer’s procedures is an acceptable option.
- Follow up: Most companies will put overdue bills at a higher priority when faced with aggressive and persistent follow-up procedures. Consistent and persistent contact often pays off.
- Put it in writing: There may come a point when it becomes necessary to put your collections efforts in writing. Some things to consider include accumulating interest charges, the possibility of bringing in a collection agency, and potential damage to their credit rating.
- Final steps: You will come across some “deadbeat” customers with uncollectable invoices. If the amount is small and not worth the trouble, it may be easiest to simply write it off as a loss. But if it is a significant invoice, it may be time to put it in the hands of a collection agency or a lawyer.
Dealing with accounts receivable isn’t what drillers want or like to do, but it is imperative to the success of your business. If done correctly, collecting on overdue accounts can help you avoid damage to your cash flow, keeping your bottom line healthy and your drilling business in business.