How to pre-screen customers for a payment plan?

[Liz Schmidt]

Thanks to everyone for your wonderful replies to my question about collecting a small debt! I was finally able to reprocess the charge card successfully, so I closed that discussion since there were already so many great ideas.

Now I'm wondering if anyone has ideas about the easiest way to do a credit check for multiple payment plans for more expensive items? I'd prefer to not require them to fill out a lengthy credit application. Is there perhaps an online service that will do a quick credit check with minimal information about the customer? Hopefully one that doesn't cost a lot?

I typically get 1/2 at the time the order is placed, and the other 1/2 in 30 days, both credit card payments. I also consider 3 monthly payments if the order is for a custom item that takes a month or two to produce and I don't have to pay cash for it up front.

Thanks to you wonderful ladies for any ideas!

Liz Schmidt
www.organicandhealthy.com

[Claudia Suzanne]

I know you can tap into Dun & Bradstreet, but that's for businesses, not individuals. Using payment plans with individuals is almost always iffy. If you're not in the position to deal with the loss, why are you giving your customers so much leeway? Using a credit card precludes the need for multiple payments unless you're selling high ticket -- i.e., over $1,500 ea -- items. If it's a question of multiple deliveries, then you don't deliver until each payment goes through.

As small business owners, we tend to think small and cheap, which is what keeps our businesses small and underfunded. This is one of the hardest lessons I've learned in the 20 years I've been in business. Would your mechanic let you pick up your car w/o payment in full? Can you expect delivery from Amazon.com without the entire charge first clearing your credit card? Yet we, being women, tend to diminish our own value and hence the value of our products and services, thinking that if we don't cut deals for our customers, they will not buy from us. Not true. In fact, customers hold us in exactly the esteem we hold ourselves. You take credit cards for health products; you need not also provide payment plans.

Claudia

[Liz Schmidt]

Thanks Claudia. Good points......The items I sell generally are high-ticket items, and often there is a month or more between the time the order is placed and shipment of the product(s). Normally customers do pay with a credit card, but often the people buying my products are young families concerned about providing a cleaner indoor environment for their children. Those are the ones I feel compelled to offer payment plans to if they can't afford to pay the full amount up-front.

Take care,
Liz

[Claudia Suzanne]

Ah, in that case, perhaps you might try NOT shipping until the entire amount has been billed over the course of however many months it takes them. I took a look at your site; you're selling beautiful and important stuff. I fully understand your desire to help young families and kids, but it is their responsibility to recognize what they can and cannot afford, not your responsibility to save the planet one family at a time (although, in fact, I do the same thing, one person at a time--but I keep the personal personal and business business, and don't expect payment for the personal). The best way to make sure you get paid is to get paid before you deliver. Build your payment schedule to allow for a payoff over a few months -- no refunds -- with final payment due on or before delivery. I use such a clause in my own contracts and would be happy to send you the wording for yours. Any financial aggravation belongs on the customer's shoulders, not yours.

Claudia

[Liz Schmidt]

Hi Claudia. Thanks for the reply. I'd love to read the clause you use in your contracts regarding payment schedules. If you prefer to email me offline, please use the contact form on my website (I don't want to post my email address here because of spam harvesting)

Thank you!
Liz Schmidt
www.organicandhealthy.com

[Ann Evanston]

I think it's important to remember, no matter how passionate you are about your business that you do not deliver the product or service until payment is received. We as women get into that "nice" mode which can hurt us! Also, I highly recommend new business owners look at pre-paid legal. It is an extremely (beyond your wildest dreams for a great lawyer!) affordable way to have a lawyer on your "staff" to assess contracts and write letters!