Extending Credit Only on Her Terms

Ellyn Meikle was an accountant who learned the printing business in partnership with a small printer and decided to open her own company six years ago. Since then, she has learned several valuable lessons about how and when to extend credit to her clients. Meikle was interviewed by freelance writer Karen E. Klein.

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I went into business for myself because I was tired of making other people money. I didn’t really need to make a fortune--my husband owns a company--but I wanted to work at home and keep productive while I raised my children.

My policy is that everyone must pay cash for the first two to three jobs. If the job is more than $100, I require 50% down and the balance COD. After they are established clients, they must fill out a complete credit application if they want to pay on terms and sign an agreement that states my credit terms. I have a net 30-day payment schedule except for a few of my bigger clients, who are on 45-day schedules. If clients are late, they are charged 1.5% interest. I charge $20 for all returned checks. If a client’s balance remains unpaid after 45 days, their credit is placed on hold until the account is resolved.

If my clients don’t pay me, then my bills go unpaid, which can get serious. But I am willing to work with people, especially long-term regular clients. I don’t charge them late fees. I understand everybody has a difficulty now and then. When there’s a long-term relationship involved, I’m willing to bend a little bit.

I had a client who filled out an application and was very good about paying. But eventually the company got into a financial bind, and they kept me sitting for several months on a $10,000 balance.

For a company my size, that hurts. I pay my vendors right away, so I had to dig into my personal savings to cover this bill. I like to take my best vendors out for a Christmas dinner every year, but I couldn’t do that when this money was outstanding.

Finally, after six months, the company paid off its balance. The firm maintained contact with me and let me know that they weren’t going to cheat me. We have a relationship, and they have a huge amount of literature that needs to be organized and archived. If I will continue to handle that job for them, they will be happy. So we worked together to clear up their past-due amount.

I didn’t send them letters dunning them, and they showed good faith by making the effort to send me something every week--even $10 when they couldn’t afford more. Now they want me to do more work for them. I said, “Sure--but only on restricted credit status.” If they pay 50% down and the rest COD, we can still work together.

When a late client is not responding to letters asking for payment or not calling me back when I leave messages, it’s a sign they are not going to pay, and I’ll turn them over to a collection agency or take them to small claims court. When I have to do that, I try to look at it as a learning experience.

When a client does not want to fill out the credit application, I’m very wary. About four years ago, I had a large client who gave me a nice amount of work every month but refused to complete the credit application. I took my chances because of the monthly income he was providing, but there was eventually a dispute about a job and he refused to pay.

Now I ask myself: “If they don’t want to fill out a credit application, why not? Is this worth taking a risk again?”

I also learned the hard way to be very careful about doing work for clients out of state. The printer I worked with years ago took on a job for an Arizona company. The client never paid his $10,000 balance, but because the company was out of state, we felt it would take too much time and be too expensive to pursue legal action. Now I do not extend credit to clients outside of California. They either pay cash upfront or COD.

If your business can provide a lesson to other entrepreneurs, contact Karen E. Klein at the Los Angeles Times, 1333 S. Mayflower Ave., Suite 100, Monrovia, CA 91016, or send e-mail to [email protected]. Include your name, address and telephone number.

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At a Glance

* Company: Phoenix Printworks

* Owner: Ellyn Meikle

* Nature of business: Commercial print production

* Location: P.O. Box 328, Harbor City 90710

* Web site: https://home.earthlink.net/~phoenixprint

* E-mail address: [email protected]

* Founded: 1993

* Employees: 0

* Annual revenue: $110,000