Slow government cash while paying current bills is a constant and recurring nightmare for nonprofit leaders. Payments from government are guaranteed to be slow. Government demands quality services and expects that the non profit will float the costs until the public payment machine wheezes into action. You can’t follow up and call on every late government payment. Save your energy for the payments in danger.
How do you decide which payments are truly at risk? How can you save your time for the payments most likely to disappear?
Determine Average Payment Speed
Each agency has its own payment speed. When you have time on a snowy day, look at the last 10 payments from each agency to your bank and calculate an average payment lag after the request for reimbursement is sent. For example, you send the invoice and notice that the agency typically issues payment 23 days after receiving the invoice. Now you have a realistic expectation of when money arrives. Ignore any collection attempts before that average payment day. You likely will not get the money, use some of your precious time, and annoy your agency contacts.
FollowUp Late Payments of Contracts in Progress
On the day after your calculated average payment day, decide if any slow government cash for contracts in progress is missing. Also look at payments and make sure that they match the invoices that you sent. Start a planned series of followups for any money missing. If the payment is late because of office vacations or layoffs, call weekly and ask to be at the head of the processing line. Ask about the new expected payment day. Â This is likely to be the only collection that is needed for money that normally arrives on time and just had an unexpected late payment.
Followup New Contracts
The greater risk is with new contracts. You may not be familiar with the contract process and mistakes are more likely to happen on all sides. Costs mount quickly as soon as services start. If the paperwork is lost or shuffling between offices, you could give an interest free loan to the government for months to come unless you keep following up. You need a daily campaign to claim what you have already earned in services provided. This is the area to place most of your collection energy.
Start the new campaign a week before services are to start. It’s not ethical for government to expect services and still not have essential legal papers prepared. Write down the names and dates of everyone to whom you speak and the topic of the call. Keep copies of all paperwork in one place for easy reference. This has to be organized as a campaign. One or two calls are unlikely to solve the blockage. Build relationships, memorize secretary names. In moments of non cooperation, find the name of the supervisor and look carefully at the agency website. You will be surprised at the effectiveness of persistence.
Conclusion
You have constructed an Accounts Receivable Schedule for Government. You have decided to ignore many late payments. You have set your collection dates as the day after the average payment day for existing contracts and 7 days before a new contract starts to operate. You will increase the speed of payments and use less energy.
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