Late Payment Issues
‘Small businesses would rather have a commercial relationship than no relationship at all’ is a phrase we often hear. Whether that is a commercial relationship that the small business can afford, if they do not get paid, is one we question
This is particularly true of the construction industry, which is an area where there’s poor practice going on relating to payments, especially at the end of the works where some unscrupulous companies seek deductions without merit.
The Start point is: ‘Don’t be embarrassed to talk about late payments’
As a small business owner, you’re probably time poor. You are focused on the deliverable base around your skill set ?so, existing contracts and money is often the last thing on your mind.
Ignoring money owed to you is not a business strategy.
Cashflow, as every business owner knows, is essential to business survival. Businesses go bust not only because they lose clients or an important contract, but more often than not because they run out of cash. Businesses fail with money still owed to them, money that, if they chase debts, could have led to a very different outcome indeed.
So how do you collect a debt that’s owed? Look at it a different way. Why do you have a debt in the first place and what’s stopping you from getting paid?
There are many reasons and excuses and you’ve probably heard most if not all of them before: we’ve not received your invoice, the boss is out, you’ll be in the next pay run, the cheque – as always – is in the post.
The Start point is always : Know your customer
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But go back a step further. What do you know about your customer? Are they a good credit risk? Do they have an established reputation? In credit management terms “know your customer” is the first – and arguably the most important – step in how to get paid. Think of it like this: a customer who doesn’t pay you isn’t a customer at all, so enter any business transaction as fully informed as you can.?
Assuming your customer is a good risk, then what have you done to prevent a debt from going bad?
Have you invoiced the correct amount, to the right legal entity and at the right address?
Have you included a Purchase Order (PO) or a PO number where one is asked for?
Have you spoken to your customer at beginning and asked them whether there is a particular process you should follow? Have you set out your payment terms as you would be shocked how many companies suddenly state their payment terms of 60days EOM prevail (that 84 days on average in real days)
It’s amazing how many invoices go unpaid and a debt goes bad simply because they never end up in hands of those people authorised to pay them.
This is especially important today. Remember your contacts are likely to be working from home, so your invoices might now have to be sent to a different person or email address.
We say KISS everything to make the difference in getting paid