Last Updated Jan 5, 2011 6:54 PM EST
My company provides technology and services for interactive webcasting and virtual meetings. Many of our clients are in the Fortune 500. Yet when we first launched 10 years ago, we had trouble getting paid. Sometimes I'd have to write a personal check to cover our operating expenses.
Then we encountered a crisis and our cash flow problem nearly sank us. I knew we had to figure out a way to get paid in a more timely manner, so I developed a set of policies to streamline our payment process. Now our internal tagline is "TalkPoint always gets paid."
A spiraling set of problems
Some of the payment problems we encountered in the early 2000s were a result of our own sloppiness. We weren't invoicing on time and would often close out the quarter and realize we still hadn't charged our clients for services that we'd already delivered.
However, the problems weren't all of our own making. Even when we invoiced promptly, companies would often take months to pay us. For instance, we'd send a big invoice to the finance department of a large company and they'd misplace it and forget to pay. This was incredibly frustrating because they had the money and we were simply getting lost in the shuffle.
Then 9/11 hit. As the city descended into crisis, many of our New York-based clients simply stopped paying their bills. This in turn threw us into crisis because we had a huge accounts payable list and not enough free cash on hand to cover our operating budget. The situation was so tough that I considered selling off our accounts receivable list to a collections agency.
Adopting new rules
As a last resort, I decided to get a line of credit, and we made it through. But I knew we needed to sort out our finances. So in 2002 I created a three-tiered billing policy, which I believe has been key to our company's success:
Payment starts with the contract. When a company makes a long-term commitment to us, we send them our standard service contract, which includes 30-day payment terms. Most clients return it, insisting that we use their contracts, many of which include payment terms of 45 days or longer. We'll agree to use their contracts, but we hold firm on our payment schedule. If the client says this is a deal breaker, we'll negotiate for pre-payment or a biweekly invoicing system. The final terms are almost always close to our 30-day goal.
Set incentives for our people. To avoid sloppiness on our end, my sales team now only gets paid when TalkPoint gets paid. As a result, they're much more diligent about recording sales and creating invoices. For smaller deals, they'll even process a client's payments with a credit card. And if a bill is large -- $10,000 or more -- we'll have our accounts receivables department bill clients weekly or bi-weekly. When an employee records a sale, a client invoice is automatically created, which makes the internal process as efficient as possible. In this way, economics drive our sales peoples' behavior -- they have skin in the game.
Work within the client's system. Our clients generally have their own automated payment systems for internal charges. So we'll ask for the internal charge codes and bill them using their own coding methodology. This shaves weeks off our wait. We also make a point of establishing good relationships with our clients' accounts payable departments. We even know their spouses' and kids' names. They appreciate this personal touch and in return make our invoices a top priority.
Cash is king
We have 100 employees and are headquartered in NYC with regional offices and technology points of presence throughout the US, Europe, and Asia. We have enjoyed double-digit growth over the last few years, and our 2010 revenues nearly reached $20 million. Now that all of our clients pay the bills on time, we're able to manage our operating budget and expenses entirely out of our cash flow.
Nick Balletta began his career as a webcasting executive when he founded his first company, NextVenue Inc., in 1998.
-- As told to Kathryn Hawkins