Does your business let regulars run tabs? Customers who maintain tabs in restaurants, bars and retail shops are often profitable, and it may be in your best interest to offer them credit. Yet unpaid balances, informal notes and missing records can quickly become unmanageable — and unprofitable. So it's important to monitor customer credit, set limits and collect overdue amounts.
When customers can conveniently access credit from your business, they may spend more time and money at your establishment than they otherwise would. Nonetheless, the informal nature of tabs can make it hard to identify who's overdue and how much they owe. Worse, some may disappear without settling their accounts.
To avoid confusion and potential financial losses, make your tab policy easy to understand with a simple statement posted prominently near your register and on any menus. For example, you might state: "We cap tabs at $250 and settle weekly."
Also, decide who qualifies for the program. In most cases, a tab makes sense for regulars who visit often — and you should define "often" in your policy. Those individuals should be willing to provide proof of basic contact information, such as their full name, phone number and email address. You might also ask whether you can run a default debit or credit card to settle their tab if they don't do so in person by your due date.
Track customers' tabs using one method consistently. This could be as simple as a spreadsheet or as sophisticated as the latest point-of-sale system tools. Include such key data fields as the customer's:
Employees should update the tabs in your system after each shift, and you should review the top balances, tabs nearing their limit and overdue accounts weekly. Color-coding — with green indicating "under limit or current," yellow indicating "near limit or due soon," and red indicating "overdue or over limit" — can make management easier. Also consider starting small with new customer credit. As customers make on-time payments and give you more of their business, you might increase their limits.
Staying on top of payment due dates is critical to running a tab program. For one to three days past due, text or call customers to confirm they know their balance and offer easy ways to pay. For seven to 10 days past due, text or call, clearly stating the amount owed and date due, and ask customers to settle within 24 hours. For accounts more than 14 days past due, contact customers and let them know you won't extend additional credit until the balance is cleared.
If you have good reason to think a tab customer is a bad actor who has no intention of paying you, file a police report, notify your insurance company and talk to your tax advisor. You may be able to deduct the loss from your federal business tax return.
When collecting on past-due accounts, make it as easy as possible for customers by texting a link to an online payment system. Or, if you have a customer's card on file, simply request approval to charge it. Just keep in mind that all communications to collect debt should take place via private messaging (such as email and text) and discreet face-to-face conversations. Don't reveal the existence of outstanding balances to anyone beyond the customer and your employees.
Running tabs doesn't mean you have to risk being scammed. Establish a simple policy, track balances and follow a consistent collections process. And to ensure your program is fair and straightforward, apply the same terms to every customer. Following these simple steps will help you protect cash flow without alienating repeat customers.
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