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:/www.duck9.com, 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

by Larry Chiang

Founders have bad credit and get it one of two ways. Not making enough money (obviously). And not so obvious, making too much money. Why?!: You won’t have car loans because you’re liquid!

Here are 10 tips for founders and their FICO score…

1. Money in > Money Out.

If this currently isn’t true, then when will it be true. Post it on a treasure wall of goals.

Treasure management.

So lets say Money in > Money Out, there still will be short falls where credit covers expenses. This is where stress occurs.

-2- Twice a month for 10 minutes do something to measure your credit quality.

I recommend a sweep of every account on your credit report. I also recommend logging into every credit card account 2x/month. If you wanna credit FICO buddie to remind you two days a month, text message me your first and last name.

The cost. I’m just trying to help you, so I guess it’s just free.

-3- Help someone with their credit.

No you can NOT give them my cell phone but you can point them towards getting a free credit report in the mail. What?! You don’t have yours?! Hypocrite! You want to use the magic of the Internet?! Long story short, you can’t, can’t can not.

Not.

If you’d like to argue this I suggest you save pain and just mail it
in.

Remember, you live in a country that can land a person on the moon with analog technology, but you can’t properly download a PDF from the unholy trinity of trans union, equifax or experian.

-4- Sign it Once.

Integrate the date into signatures. Why, you should see how easy it is to photoshop one signature onto a guarantee doc with your house as collateral?! Easy, weasie, japan-easie.

-5- Learn to love paper and mailing stuff.

Disputes must be done via snail mail. Emailing does you zero good. Calling does you less good. The fcra protects peoples rights via snail mail disputes only.

Oh and cc creditCard.org electronically all documents you mail the unholy trinity of trans union, equifax or experian.

-6- Be an Under Consumer

There is no such thing as fake-it-til-you-make-it anymore. What was a quasi possible strategy in the 80s definitely won’t work now. Plus stress from Money Out > Money in makes you retarded.

-7- Get a WIKI page to track you credit.

It looks like this and when you do your page, I’ll be your credit coach. I will be free. Why?! Cuz you won’t do shitake with this offer cuz you’re a looo-ser and you’re waiting for your overnight success so you’ll never worry about money.

News flash. 1.) GooG luck, and 2) even when you’re rich you’re still dealing with money problems. After a date I need to know exactly where every one of my sperm is cuz I don’t want a paternity suit costing me another 40k/year on a reach-around.

-8- Weekly Liquidity Event.

Pull some money off the table EVERY week.

-9- 70-20-10 Your Money and Your Time.

70% for essentials

20% for investment

10% you treat as house money. House money is not your money/time so go blow it, save it or give it.

-10- goals focused on twice per day buddie buddy. I would choose 11-11-11 which is all ones on your credit report. 1′s are on-time payment and 9s are charge-off. Good luck ducking 9s

Larry Chiang is CEO of Duck9. He is working on a book project “What They Don’t Teach You At Stanford Business School.”

Larry’s earlier posts in this series include:

9 Things Stanford B-School Won’t Teach You;

9 VCs You’re Gonna Want to Avoid;

and Hack Your Startup Credit Rating.