By Larry Chiang

Congrats on getting to $900k in revenue, getting an angel round done and avoiding the 9 VCs you don’t wanna meet. Now you’re in the kill zone cuz you have a working shippable product but you hit a speed bump through no fault of your own: the rePression (recession + depression).

A symptom of your revenue and the speed bump (a.k.a. the financial crisis meltdown) is people paying slowly or not at all. A lesson not taught in business school is how to collect on accounts receivable.

Here is a crash course in collecting money…

-1- Team Effort.

By ‘team’ I mean get the effen CEO involved.

If you have a VP of Sales they should definitely be calling to collect. Compartmentalizing the collection by leaving it to a sole administrator is dooming your collection effort to fail.

If the CEO won’t call, email this article to the HBS/GSB graduate (Harvard Business School and Stanford Graduate School of Business). Lets get ‘em out of the ivory tower and on the front lines of collection.

-2- No Fake Bankruptcies.

Fake orgasms are to make your partner feel good about themselves. Fake bankruptcies are meant to make the collector feel a sense of hopelessness so that the collector will stop calling.

Do not fall for the faker.

-3- Sell to Collections Firm.

Before you give up completely, sell to a collections firm for 10 cents on the owed dollar. Me, I’m like a multiple personality CEO because I turn into a repo man and get 40 cents/dollar at the drop of a hat. A
repo man repossess cars for a living and is at the bottom of the collection food chain. The upside is they are at the top of the aggression ladder.

-4- Got Cash?! Borrow Against Accounts Receivable

Your accounts receivable (AR) is an asset you can borrow against. In good economic times you can borrow up to 110%. After the worse job report in 115 years relased Friday December 5th, 2008, you’ll be lucky
to get 15 cents per dollar on fresh, healthy AR.

No you cannot be unethical and unload your 120+ day paper on a rookie loan officer. Translation: it is not right to borrow against accounts receivable that are 120+ days late. It’s illegal to re-date and is blatent fraud.

-5- Pay As They Go.

Put them on a payment plan on money owed and / or curtail future services.

Have you heard of people that have a payment plan for their sofa?! The idea here is that lump sum payback is too far at the end of a rainbow.  Don’t believe the rosy forcasts and collect twice a month.

-6- Voicemail the Shitake Out of Them

Voicemail their cell, work and home phone. There is no such thing as over voicemail-ification during business hours when someone owes you money.

Collection calls need to happen 3-5x per week. I’ll ask start-up CEOs, how many times they’ve called and most people quizically look at me.

Call and voicemail them repeatedly to effen get your money.

-7- Time Machine to Go To the Present

There’s nothing that makes collection easier than getting the CEO to guarantee the purchase PERSONALLY.

Collecting on loans personally guaranteed is much, much more fun.

-8- Call High Up The Food Chain

The ceo of the company that owes should be called. The goal is to set up a payment schedule with small steps towards paying the debt down.

-9- Tell On Them

In the same way that TransUnion, Equifax and Experian compile negative information in a database, Dun & Bradstreet compiles negative information and payment histories.

D&B (as they’re called) usually doesn’t take infrequent submitters but they definitely gather information as it relates to court cases. A nice tip is to threaten reporting on a bad debt to D&B and threaten filing a
lawsuit. An advanced tip is to sprinkle in the fact that you’ll sell to a collections firm (tip #3) if they don’t make at least a nominal payment (tip #5).

-10- More Deal Flow.

Don’t get demoralized just because some bad apples aren’t paying. The key is to collect on a portion of money owed but still get more deals in the door.

This means get more sales. Studies have shown that companies with more sales tend to do better than companies with waning sales ;-)

Good luck collecting. If you have collection experiences to share, post them in the comments below

I founded http:/, which educates college students on how to establish and maintain a FICO score over 750. I testified before Congress and World Bank in Beijing on credit.

My BusinessWeek blog

About the Author:

Brian Solis

Brian Solis is principal at Altimeter Group, a research-based advisory firm. Solis is globally recognized as one of the most prominent thought leaders and published authors in new media. A digital analyst, sociologist, and futurist, Solis has studied and influenced the effects of emerging media on business, marketing, publishing, and culture. His current book, Engage, is regarded as the industry reference guide for businesses to build and measure success in the social web.

Visit Brian's page at


    no imageMichael Wesolowski (Who am I?)6 January 2009 10:12 am

    Oooh Yaaaaa!

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    no imageFur on a pimp (Who am I?)12 January 2009 10:57 pm


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