Ask a Cashflow Expert: Lani Fogelberg on Breaking Free from Payment Collection Fear

5 minutes
January 30, 2025
Denym Bird
CEO of Paidnice

"People don't like asking for money," observes Lani Fogelberg, and this simple truth lies at the heart of many businesses' cash flow challenges.

As a management and strategy consultant based in Auckland, Lani has seen firsthand how fear holds businesses back from implementing effective payment collection processes.

But Lani challenges us to think, what if that fear is costing you more than you realize?

In this illuminating conversation from our Ask an Expert series, Lani shares powerful insights about overcoming the psychological barriers to effective accounts receivable management, and why being assertive about payments isn't just okay – it's essential for business survival.

Listen to the full conversation below:

The Fear Factor in Collections

"There's definitely an element of fear," Lani explains, addressing why businesses often struggle with payment collection. "Business owners can freak out about placing expectations on their clients because they worry about how it's going to impact the client relationship."

But this fear often stems from a misconception.

Lani points out a simple truth that many business owners overlook: "Pretty much every bill we pay as a responsible adult has a late fee on it. Power bills, water bills, rates bills – if you pay your mortgage late, boom, penalty interest."

This perspective shift is crucial.

Late fees aren't an unusual punishment; they're a standard business practice that customers encounter in their daily lives.

Setting Expectations from Day One

The key to confident collections starts long before any payment is due. "It really starts with how your clients engage at the very beginning," Lani emphasizes.

"You can set up all the different automations and workflows down the track to try and collect your invoices, but if you haven't managed clients' expectations well at the beginning of the relationship, that's actually going to be harder down the track."

Lani recommends being crystal clear about these three things from the start:

  • How clients can pay you.
  • When you expect them to be paid.
  • What happens if they don't pay.

The Numbers That Build Confidence

For businesses ready to take control of their collections, Lani shares her favorite AR metric: the percentage of monthly turnover sitting in overdue invoices.

"If you've got half of your monthly turnover sitting there as overdue invoices, straight away you've probably got a cash flow problem," she explains.

Her target? Under 5% of monthly turnover in overdue invoices.

One of her clients achieved dramatic results, reducing their overdue payments from over 30% to under 10% of monthly turnover in less than six months by implementing consistent processes and automation.

Breaking Free Through Automation

One of the most powerful ways to overcome collection fear is to remove the emotional burden through automation.

Lani shares a compelling insight: "Something as simple as a different voice on the end of the phone asking for the bill to be paid can be really powerful."

This is where automation tools come in. "I think one of the biggest changes that we see is that they feel such a sense of relief because they don't have to think about this anymore," Lani notes.

Business owners are often surprised to discover that clients don't react negatively to automated reminders and late fees – they just pay.

Taking Action with Confidence

When it comes to structuring payment terms and late fees, Lani emphasizes the importance of understanding your business context:

  • How often do you charge clients?
  • What are your typical invoice amounts?
  • What payment methods do your clients prefer?

"The objective for setting late fees isn't to generate revenue, it's to generate cash flow," she reminds us.

This perspective helps frame late fees as a tool for maintaining healthy business operations rather than punishing clients.

The Final Word

Lani's message to business owners is clear: "Be confident enough to do something about it. A lot of people just avoid looking at it because it's a bit scary or they don't necessarily understand the impact that it's having on their business."

The fear of damaging client relationships by enforcing payment terms is almost always unfounded.

By setting clear expectations, implementing consistent processes, and leveraging automation tools, businesses can break free from collection fear and build stronger, more professional client relationships.

Don't let fear hold your business back. As Lani shows us, the path to better cash flow starts with the confidence to take action.

Lani Fogelberg is a management and strategy consultant based in Auckland, New Zealand. Her expertise spans various aspects of business strategy, including finance, HR, sales, client management, and operations.

Denym Bird
CEO of Paidnice
Denym is a software entrepreneur and writes about accounts receivables management for small business.
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